Come the zipped Raider Today, we're going to be talking about three Defense penny stocks that you should be buying in 2019. So the stocks that we're going to be talking about have government contracts, foreign intelligence agency ties, as well as silently but growing revenue and profits For all of this, the only thing that I ask of you is that you hit that like button and also subscribe for more short sweet and simplified videos on how to trade the stock market. First stocks that we're going to be talking about is a R-tx So with this company, you see this rise over the last year and then towards the end of the year it began to be discounted. Now the discount has been pretty steady, with the RSI only indicating that it was oversold a few times.

But when you look at the long-term three-year chart, we actually see that this sell-off is actually part of a broader convergence back to long-term support at around 250. So as you can see, the stock price over the last three years has actually continuously gone up and then slowly sold off and this high amount of upward potential. It's a strong indicator to me that this stock is indeed nearing the perfect entry point. But to understand why the stock price gapped up, we must also understand the fundamentals.

If you check out the highest gap up, you can see a gap up in early January on the days leading up to and following Trump's inauguration, right? So if you actually look at the dates that the stock price gapped up, we see that it's an early January and what happened. The January Trump was inaugurated and this is when it started and people started speculating in terms of defense spending and whatnot, right? Um, but of course most of the defense sector had this trend. so this isn't some big revelation that I'm giving you, but acknowledging that this stock is also susceptible. It's one of those defense stocks that are susceptible to this political government expenditure shift, which was just very important because we want to trade off it right.

We want to figure out how we could use our knowledge of how this stock is impacted by political changes in terms of the defense sector, right, how its impacted by that, and then the next time the news comes out, we can trade off it. Going further back into a RT X's price action, we see the original and highest throwing up began in 2013 and a little research reveals that this was the same time period that President Obama had begun to argue the case for a military action in Syria. Fast forward six more years and Trump just pulled our troops out of Syria and we are starting to see a run down of share price, right? So Obama decides, oh, you know, maybe we should have no pterri action in Syria. The stock price goes up in anticipation for that and then six years later Trump pulls it out the stock price qtd selling off.

so this could be a strong reason we have seen the price discounted. But one bullish sign I See in terms of these fundamentals for this company is the following: So if you pull up the balance sheet for a RTX you could see the Epital which is basically revenue at five point Eight three million, then Nine Point Three five million in 2014 which is the year of aggressive Syrian intervention, right? So the first year 2013, it was at Five Point Eight, Three million and then the following year the year after we started considering and accepting that we're going to be going into Syria That was the year that the revenue actually went up right. So 2013 was the anticipation year when their revenue still the same, but then 2014 is when the company actually received the revenue. And then 2015 we saw a massive pushback.

But likewise when we saw this pushback in profit, we also saw the stock price gap down. And then 2016 we started seeing a growth in profit once more. So 2016 we saw higher revenue, 2017 we saw higher revenue, and 2018-19 we saw higher revenue for the first three quarters. We don't have quarter for information out yet, but at this point in time or I'm standing, we have higher revenue for all three quarters of 2018, yet the share price is still being sold off.

So here we have a company with overall growing revenue and profit that isn't reflecting in the share price. Now The reason for this is the same reason the stock ran up in 2013. even though the revenue didn't actually grow until 2014. it's because people perceive and anticipate a future revenue drop and the price overreacts before the event actually happens.

In 2013, We saw the price gap up when people anticipated Syrian intervention, not when it actually happened, but when people anticipated it. And then when the revenue actually increased in 2014, the stock price adjusted downwards. It corrected itself right. so revenues actually going up in 2014.

But nonetheless, the stock price don't went downwards because of the fact that it already factored in this increase in revenue and people had over bought it. So this is the same thing that has happened in here, but just in Reverse now all else being held equal, both the technical and fundamentals of this company. Check out! The fact that we are near long-term support also makes me feel comfortable that I'm most likely not going to lose a bunch of money when I take this position. However, the ideal entry point with this stock will still be when the RSI is indicating it's over salts that we can maximize our profit potential but also minimize our risk if the analysis is proven wrong.

But I Just want to make one last case for a R-tx So if you are a hawkish on foreign policy and you are thinking that there might be a big war coming soon, it might not be a bad idea to take your position because this ridiculous run-up last time we saw in 2004 with this stock be a big winner. If there was to be another breakout of war, it's hard to say, but they will be affected positively and that's something that you should look for in terms of their balance sheets and in terms of the fundamentals for the company moving forward into 2019. Okay, so the next stocks that we're going to be talking about is Ta Tee Tee. So this is an Israeli defense company and while they are headquartered in Israel, they are also traded on the Nasdaq.

They also experience this Trump boost that I talked about as well, but a few months later that AR TX did. So if you pull up the Reuters report, you can see that this Israeli company manufactures and sells the companies in the United States as well as foreign governments. But the important thing here is that we have pinned down its exposure to the United States and thus that means that it can be subject to fluctuations partially based on the US political defense climate. So now that we've established the fundamentals, let's talk about the price action.

so it has a consistent downward trend which frankly, I don't like. I Always talk about one in my stocks to have a consistent up or a trend because I like to trade winners, right? I Don't want to trade companies that are going down consistently I Want to trade companies that are going up I Feel like that's common sense, but a lot of people look at the fundamentals. They're like, oh, this penny stock, this is the next Apple or whatever. Well, that's stupid.

But if you look at the last year of the price action, we are starting to see signs of a reversal. We are starting to see higher and higher breaks above the SMA line and the RSI is continuing to show our share price becoming more and more discounted. So with that in mind, if we continue to see it attempt a comeback from its all-time low here on the Nasdaq I'll be tempted to take a swing position. Um, now.

the reason I'm advocating a swing position and not a long-term position is because this company does have several fundamental red flags. Most notably, its lack of liquidity, right apparent to its competitors. The liquidity is just awful, so that's it's. so important that you get in at a good position when you're seeing a dip into the oversold territory on the relative strength index.

The next thoughts that we're going to be talking about is: LRAD Now LRAD is another exposure play. They manufacture acoustic hailing device for both aerospace and defense industry. so we have the exposure here, right? So I dug a little bit more and I found that the United States was naturally one of their biggest clients. I'm digging even a little bit deeper.

We see that the US Air Force just added 1.1 million to their 19 million-dollar order for these LRAD devices. Okay, so now that we've established the connection, if we look at the price action from this year, we see a more recent run-up to 358 and then a slow sell-off now based on price action alone. I Wouldn't rush to say that it's being overly discounted, but this is another play where we are starting to see a rise above the SMA line in the first few days in 2019 and that could be signs of a reversal. Think that if we see a continued rise above the SMA line and so picking up on the MACD event, I'd be tempted to take a position.

Another thing is that its major competitor, Universal Electronics. They do have a smaller price to share ratio, so that could be an indicator that if LRAD does take up more of the market, that they are going to be able to monetize it more efficiently than Universal Electronics did. And also it's worth mentioning that most analysts are ranking this is having a 40 percent potential upside. but that's not relevant because I don't really care what the analysts say I like to look at the fundamentals and I like to look at the price action and I'd like to decide for myself.

Make sure that you do your own research right? Anyways, guys! I Hope that you found this video Helpful if you're interested investing in penny stocks I Highly recommend you check out my Penny Stock 101 video where I go over my three favorite strategies to invest and trade penny stocks in 2019. And if you are completely new to day trading, there's two things that I want you to do. The first one is to watch my Day Trading 101 video where I go over everything from how to pick a broker to to where and when to find stocks to trade and as well as my RSI video that discusses exactly how to buy stocks when they're oversold or overbought. For more short, sweet and simplified videos, hit that subscribe button and I'll see you in the next one.