Technical analysis 🔼 Is Rheinmetall testing the upper boundary of its descending channel?

Shares of Germany's largest defense contractor, Rheinmetall, are up nearly 3% today amid a broad-based global rally in defense stocks. In the United States, strong quarterly earnings have lifted shares of RTX and Lockheed Martin, supporting sentiment across the sector.

Rheinmetall secures Europe's biggest ammunition production bottleneck

Europe's main challenge is no longer funding higher defense spending but producing enough ammunition to meet growing demand. Rheinmetall is expanding its Aschau am Inn facility under the "Project Firepower" initiative, aiming to more than double annual gunpowder production to approximately 4,200 metric tons by 2028. At the same time, the company has secured its own supply of nitrocellulose—the key ingredient in modern propellants—and says it has accumulated reserves sufficient for around four years. This removes one of the largest operational bottlenecks facing Europe's defense industry and strengthens Rheinmetall's competitive position relative to manufacturers that remain dependent on external suppliers.

The company is steadily building an advantage through full ammunition supply chain integration

Rheinmetall is one of the few defense manufacturers globally that controls nearly the entire ammunition production process—from propellants and gunpowder to cartridge cases and finished artillery and tank rounds. The expanded Bavarian facility will also host an R&D center focused on next-generation high-energy propellants and alternative cellulose sources, reducing Europe's dependence on imported raw materials. Combined with an expected order backlog exceeding €100 billion by the end of the year and NATO's long-term rearmament plans, this suggests that Rheinmetall's future growth is increasingly constrained by manufacturing capacity rather than customer demand.

RHM.DE shares (D1 chart)

Rheinmetall shares continue to trade within a descending price channel and have retreated by roughly 50% from their all-time highs. Following today's rally, the stock is testing the upper boundary of that channel. A sustained breakout above €1,150 could signal a potential trend reversal. Meanwhile, the 200-day exponential moving average (EMA200)—a widely followed indicator of long-term momentum—currently remains around 35% above the current share price.

Source: xStation5