ETF traders looking for short-term momentum plays may want to put the Direxion Daily Aerospace & Defense 3X Shares ETF (DFEN) on their watch lists.

DFEN seeks daily investment results equal to 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index, which attempts to measure the performance of the aerospace and defense industry of the U.S. equity market. Like the rest of Direxion’s roster of leveraged ETFs, DFEN gives traders the ability to:

  • Magnify short-term perspective with daily 3X leverage;
  • Go where there’s opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile – with liquidity to trade through rapidly changing markets

The fund is up 32% behind strong momentum to start the year.

DFEN Chart

DFEN’s relative strength index (RSI) is registering a reading of 69.34, which is just below overbought levels.

Adding a moving average convergence divergence indicator (MACD), renders the exponential moving average (EMA) above the signal line, confirming the momentum. The 50-day moving average has sustained its steady position above the 200-day moving average, and is currently 22% higher.

DFEN Chart

Where Is Aerospace & Defense Headed?

From a fundamental standpoint, more defense spending could give DFEN the necessary tailwinds for more sector strength. Looking at the sector from a domestic standpoint, U.S. President Joe Biden’s administration doesn’t look to be making any defense cuts anytime soon.

Looking at the sector from a global standpoint, spending is also trending higher, which bodes well for DFEN.

“The Global Defense spending has been on a major upswing led by the return to great power competition amongst leading geopolitical powers spearheaded by R&D led technological evolution,” a GlobeNewswire release stated.

“The realignment of U.S. defense spending focus on competing with near peer adversaries and maintaining the traditional overmatch over adversaries has accelerated the pace of replacement of ageing equipment with the award of several new defense contract awards over the recent years & many others in pipeline which remain a key focus area for the industry given their strategic nature, scale as well as scope & long term horizon,” the release added.

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