Smith & Wesson (
fellow gun maker
Sturm Ruger & Company (
rose today despite new gun control laws proposed by President
The president outlined a series of gun control regulations,
including a ban on large magazines and universal background
checks for any gun buyer.
Nearly 40% of gun sales take place without background checks. So
Obama's new gun control proposals could lower gun sales.
Though the potential for lower revenue did not hurt the shares of
SWHC or RGR today, that shouldn't imply these are good stocks to
buy. In fact, SWHC may be on the verge of a large pullback.
The shares recently fell below the support of a long-term trend
line (blue). The lack of support in December may signal that
buyers will let the shares fall further before stepping back into
Moreover, volume spiked as the shares lost the bullish trend line
(arrow). This indicates that sellers massively overwhelmed
buyers. Because volume was so high, it also stands to reason that
selling pressure will intensify as the shares rise back up to the
$9.50 zone. It could become a difficult resistance area, keeping
a lid on price appreciation.
This chart shows the price of
shares along with an important broken trend line to
Though the two gun manufacturers posted gains of more than
4.5% following Obama's speech, the pop could be short lived. SWHC
in particular may turn lower as the shares approach a challenging
The $8 level has supported the stock well during the past month.
However, if that support zone fails, a drop to the next support
zone at $6.50 may occur.
Equities mentioned in this article: RGR, SWHC
Positions held in companies mentioned above: RGR,