Is The Best Portfolio Offense Found in Defense?

One pocket of the market that has been on an absolute tear higher year to date has been the Aerospace & Defense industry. The secular trade higher in this industry has of course been fueled by rising geopolitical tensions around the globe. Numerous countries have come to the realization that sometimes the best offense is actually having the best defense, causing a ramp up in sovereign defense spending. The downstream effect of this has been for many countries quickly acting to either replenish or accumulate stockpiles of defense supplies. Companies that help to deliver cutting-edge defense solutions have been reaping the benefits from the ballooning demand for their services.

As we are currently watching yet another series of events unfold across the Middle East, this is only going to be additive to the bullish case for these major defense contractors that will help to re-arm our allies around the globe. Modern day combat has evolved, no longer are the days of numerous ‘boots on the ground’ to support large scale military operations. Now, these operations are often carried out using state-of-the-art unmanned systems & drones. One of the top manufacturers of these systems and drones is Kratos Defense & Security Solutions, Inc., symbol: (KTOS). Check out the chart for this stock that so far this year has been seemingly unstoppable!

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Here we have a chart reflecting the daily price action of KTOS stock over the past year. Of course, the first thing that jumps off the chart for me is the powerful trend underlying KTOS. The stock price is moving from the lower left to the upper right of the chart, which is indicative of a relentless bullish trend. But this is not all that I see here. In just the past three weeks, the momentum behind KTOS stock has been accelerating even more, pushing the stock to make a series of new 52-week highs! This is the kind of bullish breakout that can land a stock on my personal ‘Buy List’.

Since I have verified that KTOS merits being placed on my ‘Buy List’, next I need to figure out my preferred method to trade this setup. Generally, when I spot a setup like this, the first place I’ll check for an appealing trade is in the options market. Looking at the current options available for KTOS, they are carrying a lot of extra option premium which makes these options a perfect candidate for my call debit spread strategy. By utilizing this personal favorite strategy of mine, I will be able to leverage these expensive options to ‘SUPER-CHARGE’ my trade. At current prices, there is a call spread that is offering a 56.2% profit potential if KTOS rises, remains flat, or even decreases by 7.5% at option expiration. Finding compelling trade setups just like this one is why I developed my PowerTrend trading strategies and I’d love to share them with you!

Wishing You the Best in Investing Success,