Aerospace sector targets 4600 level

After a steady run higher in 2012 and 2013, the daily graph for the aerospace sector looks grimmer.

A sharp gap lower in mid-February for this sector, consisting of firms such as BAE and Rolls-Royce, took it through the 200-day moving average.

Both BAE and Rolls Royce had to announce difficult results during February, negatively affecting investor sentiment. The former experienced a £700 million drop in revenue, prompting a 10% fall in its share price. The latter expects no revenue growth, a stark change from the forecast 5%, as defence cuts take effect.

We’ve seen the sector drop back this morning too, and with the 200-DMA broken, and beginning to point lower, the outlook seems to point towards further losses.

We can see the 4600 level provided significant support in April of last year, and also in the middle of this month. As a result, I would look to initiate short positions with a target around 4600, some 250 points below the current level, with a stop loss in the region of 5000, where the 50-DMA currently resides.

Aerospace and Defence chart

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