Weekly Update: Defense Stock Ready to Breakout
Good evening, and welcome to this week’s edition of Stealth Trades!
The markets remain quiet and continue to bounce around in the same 5% range they have been all summer.
This is normal. In fact, it is necessary.
After the big rally we saw in April and May, stocks need a chance to digest the move.
This is what sets up the next leg higher.
But it is also boring.
So, instead of wasting your time with a deep dive and how things look “fine” I decided instead to feature a recent IPO setting up in a clean pre-breakout pattern.
The company is Beta Technologies, ticker BETA. The company makes electric aircraft that can take off vertically, along with several other sci-fi looking pieces of equipment.
BETA went public on November 5th and, like most IPOs, quickly fell by more than half.
This happens most of the time. Stocks hit the market at ludicrous valuations, price discovery takes them down, until eventually shares reach a fair value and investors start buying – classic stage analysis.
Take a look at the chart:
BETA spent the last five months quietly consolidating near its lows. Dips are shallowing, the moving averages are turning up, and there is clear resistance around $20 a share.
Fundamentally, there’s not much there yet. Revenue is minimal and profits are non-existent. So, it is still a “story stock” priced on assumptions of future success.
But given the situation in Iran, the likelihood this thing drags on longer than expected, and the administration’s goal of increasing America’s military budget by 50%, the defense sector is not one to sleep on.
If BETA breaks out above $20/share, it would make a compelling buy for me.
Best wishes for your trading,
