Middle East conflict flares up, drone demand doubles — long defense stock AeroVi
Thesis
AeroVironment (AVAV) just reported a massive earnings beat and a doubled backlog, highlighting a surge in defense spending that is independent of the tech sector's AI jitters. At the same time, a flare-up in the Middle East has disrupted global oil shipping, reinforcing the need for advanced military technology. With the Magnificent Seven shedding $2.3 trillion in value over June, investors are rotating capital away from vulnerable mega-cap tech and into defense contractors with tangible, growing revenue.
Strategy approach
Build a rule-based strategy that enters long AVAV on D1 when the stock makes a new 20-day high while QQQ is trading below its own 50-day moving average, signaling defense outperformance during tech weakness. Use a 21-day max hold and a 8% trailing stop.