A Look at Five Aerospace Suppliers

Making airplane parts has its ups and downs, because the industry is vulnerable to the vagaries of the economic cycle. For obvious reasons, suppliers make a fortune when growth is booming and a vast user base needs to upgrade civilian and military fleets. But harder times always return when budgets contract, like they did in the aftermath of the 2008 crash.

Of course, all cyclical companies face this challenge, whether it's industrial equipment or hotel reservations. That's the major reason investors need to exercise market-timing when taking exposure in Boeing's part suppliers. Although airplane purchases and upgrades should boom in the next two years, the tide will eventually turn once again, dropping these issues back down to Mother Earth.

BE Aerospace (BEAV) -- Daily Source: eSignal

BE Aerospace makes cabin interior devices, such as seat frames, ovens and drink carts. It sold off from $54 to $8.55 during the bear market, bottoming out in November 2008. The recovery retraced 50% of the decline and topped out at $31 in April. The stock sold off to $24 during the "flash crash" and tested that level twice between May and July.

Price rallied back to resistance earlier this week and pulled back. New support near $27.50 should hold this decline and set up a basing pattern, ahead of another breakout attempt. Accumulation has remained very strong through the three-month correction, pointing to an eventual breakout and rally into the low $40s.

Spirit Aerosystems (SPR) -- Daily Source: eSignal

Spirit AeroSystems builds commercial airplane structures, including fuselage, propulsion and wing systems. It got beaten up in 2007 and 2008, dropping from $42 to $7. The uptrend since November 2008 has been solid but not breathtaking, with the stock recovering less than half of the bear market decline.

The stock sold off in April, cutting through the 200-day moving average, with price crisscrossing that level six times. It has now bounced into six-week resistance near $21.50 (red line) for the third time. A breakout over that level would support a strong recovery, but that might have to wait for a "higher low" at $20 (blue line).

LMI Aerospace (LMIA) -- Daily Source: eSignal

LMI Aerospace builds specially alloy and metal products for airliners, as well as all sorts of engineering systems and designs. It rallied sharply off the March 2009 low at $3.90, lifting to $19.31 in late March of this year. The stock then dropped into a broad rectangle pattern that's still in place four months later.

Price tested support near $15 and spiked toward resistance three weeks ago. It's now trading near the midpoint of the broad range and showing no signs that it's getting ready to break out. However, accumulation has remained healthy through this consolidation phase, and Aug. 6 earnings might provide a positive catalyst for higher prices.

Titanium Metals (TIE) -- Daily Source: eSignal

Titanium Metals manufactures milled and melted titanium products for a variety of aerospace applications. The stock topped out at $47 in 2006, well ahead of the broad market, and entered a long downtrend that ended at $4 in early 2009. The subsequent recovery is still going strong, despite broad market headwinds.

The stock pulled back from a two-year high in June and found support at the 50-day moving average near $17. It returned to resistance last week and broke out on Friday, posting strong volume. The rally lifted over $22 and reversed sharply on Tuesday. A decline into new support at $20.75 (blue line) should offer a great buying opportunity.

Rockwell Collins (COL) -- Daily Source: eSignal

Rockwell-Collins designs aviation electronics, such as navigation systems and cockpit displays, for civilian and military aircraft. This company was an aviation leader between 2002 and 2007, rising sevenfold and topping out at $76. It bottomed out in the low $20s and entered a new uptrend, lifting into the upper $60s in April of this year.

The decline since that time shows three down waves, with the third selloff dropping the stock to a five-month low earlier this month. It bounced strongly in the lower $50s and rallied back above the 50- and 200-day moving average. Despite recent gains, this looks like a base-building exercise that will take another three to six months to complete.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider LMIA to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.