Virgin Galactic (NYSE:SPCE) has lifted off, but is today’s enthusiasm misplaced? Let’s examine what’s happening off and on the price chart and see how today’s investors can better prepare for a more profitable tomorrow.
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Space tourism operator Virgin Galactic is going places. Maybe not today, but it’s in the not-so-distant future. And right now, investors are taking stock in SPCE and sending shares higher by nearly 14% Thursday.
Oh, those silly fanatical bulls, right? Nope. Today’s rally in SPCE is anything but just another confidently and overexcited performance in an overbought market led by Apple (NASDAQ:AAPL), Tesla (NASDAQ:TSLA), Shopify (NYSE:SHOP) or some other large-cap tech giant. It isn’t. Really. Thursday’s rally was nothing short of a much-needed and well-deserved breath of fresh air for SPCE shareholders.
Despite the Nasdaq Composite index having blasted through its February all-time high more than a month ago, SPCE remains roughly 50% below its peak valuation. Blame the mid-cap, extraterrestrial travel outfit’s relative weakness of the past few months on the ugly side of investing after overzealous momentum rightfully fizzles out. It happens in growth stories like SPCE all the time. And some stocks never fulfill their early and well-bid promise. But SPCE looks encouragingly different.
Off the price chart and behind Thursday’s enthusiasm, Virgin Galactic has announced it has a new, well-respected veteran at its helm. The company is welcoming Walt Disney (NYSE:DIS) executive Michael Colglazier aboard as SPCE’s CEO. The July 20 appointment will also see Virgin’s longstanding CEO, NASA and FAA veteran George Whitesides, move into the position of chief space officer. Aye, captain.
The new CEO’s success as president and managing director at Disney Parks International should prove very transferable as Virgin Galactic gears up for zero-gravity customer adventures. It should also come in handy for SPCE’s partnership plans with NASA to realize high-speed point-to-point city travel for civilians. All told, it’s a smart move in the chain of command. And bottom-line, with business gaps continuing to be filled, other “GAAPs” still steeped in red ink, can be put in the rear-view mirror.
SPCE Stock Weekly Chart
Source: Charts by TradingView
Bearish pessimists can snicker that the only overlap between Colglazier’s work experience and his new employer are long lines and turnstiles. But optimistically and for those with a slightly higher risk tolerance, the last laugh should be had on the way to the bank on the back of a well-positioned SPCE stock price chart.
Technically, Thursday’s price boost in SPCE has shares battling its May high. But it’s also a second challenge of the stock’s 38% retracement level within a five-month long corrective base. Second attempts like Thursday’s work often enough to be upbeat about an imminent breakout. But there are more reasons to be positive on Virgin Galactic right now, too.
Thursday’s testing also marks a successful move out of a healthy triangle congestion pattern. Further, the rally’s strength has effectively confirmed a new higher-high in SPCE shares. Along with a supportive trending stochastics setup, there’s every reason to see today’s price action as an emerging uptrend.
Ready to Blast-off
The immediate forecast is for shares to move higher into the right side of its corrective base and, just maybe, blast-off to new all-time highs by next year.
For investors agreeable with our bullish outlook on SPCE stock, I’d recommend an intermediate-term, out-of-the-money bull call spread. The advice isn’t entirely new. However, a favored October $24 / $28 call vertical is a fresh idea that looks well-priced. And for $1.00, while the risk to reward may not look entirely out of this world, off and on the price chart this position looks fit in lieu of boarding Virgin Galactic shares.
Disclosure: The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.