Shares of Virgin Galactic (NYSE:SPCE) launched higher this week, but are they bound for full-borne flight or will investors likely abort their current mission? Let’s examine what’s driving SPCE stock off and on the price chart. Then we can reach a stronger risk-adjusted determination for positioning.
Space, it’s the final frontier. Most of us who are also familiar with Star Trek know that as an absolute truth. It’s also what dreams (or at least a smaller sliver of the portfolio dedicated to more speculative holdings) are made of. And on Monday those investors long the combination saw lift-off of nearly 16%.
So, what gives? The imminent extraterrestrial travel outfit soared on news it struck a new deal with NASA. And it could be huge win for SPCE.
In a nutshell, Virgin Galactic and the space agency have agreed to train astronauts readying for voyages to the International Space Station. The partnership plays importantly into Virgin Galactic’s business ambitions as NASA eyes the ISS’ commercial possibilities and which also includes getting civilians mission ready.
The agreement also follows last month’s “other” deal with NASA.
That contract received less attention, as it was buried in the fine print of the company’s quarterly press release. But as InvestorPlace’s Matt McCall optimistically alerted readers to, the partnership to develop high-speed travel technologies here at home is a big diversifying and potentially very large profitable win.
All told it appears SPCE stock’s angle on growth is another step closer to filling in business plan gaps. That could eventually leave today’s GAAP (still steeped in red ink) as a thing of the past. And if the Virgin Galactic price chart is any indicator of future missions for shareholders, there are reasons to be positive.
SPCE Stock Weekly Chart
Source: Charts by TradingView
To be clear, SPCE stock is a riskier investment. And any allocation of monies towards Virgin Galactic can’t be categorized like a purchase today of Apple (NASDAQ:AAPL) or Home Depot (NYSE:HD). But similar to those stock’s storied paths for investors, Virgin Galactic shares are a promising growth narrative which could earn more than just bragging rights in years to come. But let’s not get ahead of ourselves.
Technically speaking, SPCE stock is at a critical crossroads on its price chart. This week’s jump in share price confirmed an encouraging third higher-low pivot. As the provided weekly chart also reveals, the bullish pattern also has more at stake than usual.
Bottom line, the formation’s confirmation has occurred off a test of still-building trend support while also gratefully reversing shares back above the 76% retracement level. It’s our contention the weekly low needs to hold or risk having much larger downside exposure.
Optimistically, the forecast for the remainder of this year is for Virgin Galactic to break above previously tested 38% resistance and challenge the 50%-62% Fibonacci levels. But even if that plays out, investors should be prepared for a bumpy (and at times very counterproductive) ride capable of knocking out the best-intentioned stop losses.
For investors agreeable with SPCE stock’s upside prospects, one favored limited and reduced-risk way to gain exposure versus buying Virgin shares is to purchase an intermediate-term and out-of-the-money bull call spread. This type of position allows for a potential multi-bagger given its leverage. At the same time, investors aren’t left holding the bag and worrying about unwanted cargo in the portfolio if yesterday’s booster rockets fail on the price chart.
Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. 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.