Defense spending surge fuels drone boom — AeroVironment momentum play
Thesis
AeroVironment (AVAV) just doubled its revenue and backlog, sending the stock up 28% in a single day. This is a direct beneficiary of the U.S. military's modernization push. Simultaneously, a major macro development occurred: the Supreme Court expanded the President's power over federal agencies. This centralization of executive power streamlines the defense procurement process and makes aggressive military spending policies more likely to stick. Buying AVAV on momentum dips captures this structural shift in defense priorities.
Strategy approach
Build a momentum continuation strategy for AVAV on the D1 timeframe. Enter long when the stock makes a new 10-day high following the earnings gap up. The thesis relies on institutional accumulation post-earnings. Use a 21-day maximum hold period to capture the drift. Set the stop loss at the low of the earnings gap day (the day before the 20%+ jump).