Defense stocks just rocketed to all-time highs, and some strategists are betting on even more gains to come.
The U.S. aerospace and defense ETF, the ITA, hit an all-time high on Wednesday, bringing its 2018 gains to 16 percent. The ETF has gained 12 percent in just the last three months, driven in part by heavy defense spending.
The price action in the last week has been particularly notable, as names like Boeing, Raytheon, Lockheed Martin and L3 Technologies have outperformed the market.
"As a trader, you never ignore all-time highs. That's usually a very, very strong bullish signal that suggests the market is feeling very positive about long-term trends," Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, said Tuesday on CNBC's "Trading Nation."
He likes Raytheon, in particular, as a standout beneficiary of the broader defense trend. The company is performing well on the bottom and top lines, Schlossberg said, and it's been growing its dividend.
"For an investor who's looking for long-term capital appreciation with dividend growth, I think this presents a very interesting trade in the defense sector," Schlossberg said.
A technical analysis of Raytheon shows the stock has more room to run, according to Matt Maley, equity strategist at Miller Tabak.
"Over the summer, it broke above its multimonth trend line, so that's positive. But more importantly, it had been bumping up against its 200-day moving average most of the summer, couldn't break above it, and it finally has just in the last week or two," Maley said on "Trading Nation."
The broader group is starting to break out in a more substantial way than it had even just a few weeks ago. Lockheed Martin has seen a similar breakout on the chart, Maley said, though pointed out the stock is nearing an overbought condition.