Last week I wrote about two drone stocks after President Biden announced an additional $800m in security assistance for Ukraine, which includes drones.
The two stocks that were on my radar were DPRO and UAVS.
Just three trading sessions after adding DPRO and UAVS to my radar, DPRO gapped up close to 100% and traded to an intraday high of $3.84, according to the below chart from stockcharts.com.
When I first wrote about this stock, it traded in the $1.60s.
How could I foresee a breakout in the stock, and why did I have it on my radar?
I make three vital considerations when researching and adding a stock to my list.
DPRO and UAVS ticked all the boxes.
Firstly, and as I previously mentioned, I look at the bigger picture. How is the overall market and the IWM performing?
Secondly, Is the attention growing in the individual stock and sector? Is there a catalyst?
Lastly, are the technicals lining up for a favorable risk: reward opportunity?
I want to expand on those points to make sure you understand how each contributed to me adding these stocks to my radar.
The Bigger Picture
When I first wrote about these two drone stocks, the IWM closed the day up over 3% and broke above the declining 20d MA.
I mentioned that a reversal in the IWM could signal a reversal in small-caps and an increase in small-cap opportunities and volatility.The IWM continued its move higher, and the following day broke above the 50d MA and then broke above the previous pivot high of $205, as you can see in the below chart from Finviz.
Was there a Catalyst?
The first catalyst was the President’s announcement, which I shared in my last piece.
That catalyst, along with the favorable technicals and possible reversal in IWM, told me to have drone stocks on watch.
Then, two days ago, a further catalyst dropped for DPRO.
The company announced that they have received an order for its proprietary medical response and search and rescue drones for immediate deployment in Ukraine.
That announcement caused the stock to gap up over 2X versus where it traded when I first wrote about it.
The Technicals
As I said in the last piece on DPRO, I loved the breakout over the moving averages and consolidation.
I mentioned that this move might have confirmed a reversal in the stock.
I also mentioned that I was looking for an entry on the long side if the stock was able to make a higher low, which it did.
The Bottom Line
Sometimes putting a thesis or game plan together is like doing a puzzle.
I patiently join the correct pieces while keeping the bigger picture in mind.
That’s exactly what I did here.
All of the pieces joined, from the catalyst to the overall sector and market, and the favorable technicals.
As a result of the stars aligning, the stock experienced a significant move to the upside.
Gang, I hope you now better understand how I developed this idea and how I search for and add stocks to my watch list.
