On Sunday, Raytheon Compay [NYSE: RTN] and United Technologies [NYSE: UTX] announced that they plan to merge. The merger will see them form an industrial giant with a market value of $166 billion. The combined revenues of the two will also make the new company the second largest defense company in the world. It will be a one-stop for missiles, jet engines, and other plane components.
The new company will have a number of advantages in the industry. The most significant one is that it will have more leverage over suppliers. Due to its sheer size, the company will be in a better position to negotiate with suppliers. The result is that, it can lower operational costs, and get better profit margins from its operations. In the recent pasts, defense and aerospace companies have been pushing for more control of the supply chain. For instance, Boeing has been forming joint ventures that give it more control over its supply chain. It’s a pointer that controlling the supply chain is critical growth for growth in this industry, and this merger puts Raytheon and United Technologies ahead in terms of long-term growth and sustainability.
Looking at the two companies’ price action, it depicts a picture of growth. On the 5-day chart, Raytheon has been on a bullish trend, and closed Friday trading around the high of the day at $185.91. With this merger news that came on a weekend, Raytheon looks to trade in bullish territory when the markets open. This bullish sentiment is supported by the clearly formed bullish trend on the daily chart. On this chart, Raytheon is on a bullish trend, with major support around the $173 to $174 range on the daily chart.
As for United Technologies Corporation [NYSE: UTX], this company has been consolidating between $132.12 and $132.63 on the weekly chart, after a sustained bullish rally earlier. If the merger news with Raytheon pushes it above last week’s high of $132.97, then it could possibly see a bullish continuation. A bullish breakout for United Technologies would have a possible target of $134.40 on the monthly 50-day MA. It’s the next key resistance level for this stock in the month.
Other factors that could play a role in the bullish trend of these stocks in the day include the overall performance of the market. One factor that could influence the whole market in Monday trading is the shelving of tariffs on Mexico by the U.S.