Will Boeing and Raytheon Stock Take Flight?

Two of the biggest players in aerospace & defense, Boeing and Ratheon, have been on the path to recovery this year. If both can take flight, the Direxion Daily Aerospace & Defense 3X Shares ETF (DFEN) might just take off as well.

“Global aerospace and defense (A&D) industry revenue is expected to begin to recover in 2021 after a difficult year in 2020,” a Deloitte report said. “But this recovery will likely be uneven across the two key sectors, commercial aerospace and defense. The commercial aerospace sector has been significantly affected by the COVID-19 pandemic, which has led to a dramatic reduction in passenger traffic, in turn affecting aircraft demand.”

“As a result, the commercial aerospace sector is expected to recover slowly, as travel demand is not expected to return to pre–COVID-19 levels before 2024,” the report added. “The defense sector is expected to remain stable in 2021, as most countries have not significantly reduced defense budgets and remain committed to sustaining their military capabilities. However, given the disruption in the complex global supply chain, some defense programs could face minor cost increases and schedule delays in 2021.”

Combined, Boeing and Raytheon comprise over 30% of DFEN’s holdings. Boeing and Raytheon are up 12% and 19%, respectively. this year.

BA Chart

Technical Indicators

DFEN, which is up 44% thus far on the year, seeks daily investment results equal to 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index, which attempts to measure the performance of the aerospace and defense industry of the U.S. equity market. Like the rest of Direxion’s roster of leveraged ETFs, DFEN gives traders the ability to:

  • Magnify short-term perspective with daily 3X leverage;
  • Go where there’s opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile – with liquidity to trade through rapidly changing markets

Looking at the technical year-to-date chart, momentum appears to be on the side of DFEN. The 50-day moving average has been trending higher than the 200-day moving average, which could portend to future strength that could last through the year.

Furthermore, the relative strength index (RSI) is sitting right in the middle of overbought and oversold levels. Traders looking for an entry point could use this as an ideal area of value.

DFEN Chart

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