KWESST Micro Systems (KWE.V) is a company that develops and commercializes breakthrough next-generation tactical systems that meet the requirements of security forces and personal defense for overmatch capability against adversaries.

Have any of you guys played Call of Duty Modern Warfare? If you have, all that stuff that the infantry use is essentially what KWESST deals with. We are talking about networked systems, counter drone systems, ground laser defense, electronic decoy systems, smart ordnance systems, and low energy cartridge capabilities.

One thing to stress, is KWESST does not build missiles and offensive weapons to take out threats such as a Haliburton or a Lockheed Martin. KWESST deals with non-lethal, defensive capability technology. It is all about protecting our boys in boots. I say this because some younger investors bring up ethical reasons for not investing in warfare stocks. You do not need to worry about that with KWESST.

If you are up to date on current affairs, you have seen Russia-Ukraine headlines. Lots of chatter about an imminent Russian invasion. In this day and age with a large retail crowd in stock markets, they are already looking at ways to play this news. Military and Defense stocks will be gaining some popularity. And I do not think it is going to be temporary.

Unfortunately, geopolitical tensions will continue to escalate in years to come. Hot spots include: Russia-Ukraine, North Korea-South Korea, India-China, and China-Taiwan. I probably missed a few, but you get the picture. Tons of people are talking about Russia, but China is what most strategists and geopolitical analysts are focused on.

The Thucydides Trap, where a weakening power feels threatened by a rising power. This situation has occurred numerous times in history, and around 75% of them result in a shooting war. Let’s hope this is not the case with the US and China, but for those wanting to delve more, Ray Dalio’s new book on The Changing New World Order is a great read. Both nations are in a currency war, a trade war, a technology war, and a financial war. Shooting war would be the final stage.

Let’s hope no shooting war occurs, but one thing is for sure, military powers will continue to spend large amounts of money on military and defense in order to deter the other side from gaining the advantage. Again, this likely means any stock related military and defense will be safe bets heading into the future.

The stock broke out into new record high territory back in September of 2021. When we pulled back to retest the breakout zone, we unfortunately closed below, confirming a fake out. The stocks then drifted lower, and we here at Equity Guru spoke about the major support at $1.70. The stock was seeing buyers defend, but overall stock market weakness saw money leaving many small cap stocks. We broke below $1.70 and drifted lower.

Buyers began piling in at the $0.60 zone. Very close to previous all time record lows. On January 31st 2022, we printed an engulfing candle at this support. Out of all the candlesticks, the engulfing candle is one of the strongest and most reliable single candle. The key is that it must be printed at a major support zone AND in an extended downtrend. KWESST meets both criteria.

It is a positive sign, but my readers know I like to play patterns. After a downtrend, I like to see a range and some basing to let me know that selling pressure has subsided. I am hoping this will be the case here with KWESST. I have drawn out what I would like to see in the coming days and weeks. For prices to once again drift a bit lower to the $0.60 zone before breaking out above the $0.90 resistance.

This could also print a reversal double bottom pattern. One of my favorite reversal patterns.

In summary, KWESST is looking really good. The macro backdrop is positive for defense stocks, and the technicals are lining up well. I think this is a company whose story has not reached many ears in the public markets. If the stock plays out as I have outlined, we would be in a new uptrend, and investors and the market will definitely begin paying attention.