On the back of a rocketing stock market, but one also showing some wear and tear to its fuselage, Virgin Galactic (NYSE:SPCE) managed to lift higher to kick off the work week. But is it time for investors to climb on board as buyers in SPCE stock? Let’s look at what’s happening off and on the price chart, then offer a risk-adjusted determination for deploying capital smartly based on the evidence.
A Glance At Virgin Galactic
To say Monday was a good one for many investors is an understatement. Driven by upbeat novel coronavirus vaccine news from Pfizer (NYSE:PFE), and continued optimism that President-Elect Joe Biden will take office, the Dow Jones Industrial Average soared higher by 3%. At the same time, mid- and small-cap stocks took the lead with gains of roughly 3.5% to 5%.
Given the described rally, it may come as little surprise SPCE stock saw its shares jump by almost 7.5%. As a more volatile mid-cap technology enterprise still mostly valued on investor expectations and bullish forecasts of what might be in 2021 and beyond, a good day for the market like Monday’s should work its way into SPCE stock, right? It makes sense. But the aforementioned percentage gains were actually anything but convincing or uniform Monday.
At the end of the day Monday, the Dow actually cut its gains by nearly half. The bellwether also finished at session lows after opening near its intraday high. And diversified blue-chip technology stocks took it on the chin. Apple (NASDAQ:AAPL). Tesla (NASDAQ:TSLA). Amazon (NASDAQ:AMZN). Nvidia (NASDAQ:NVDA). Each finished firmly in the red after early gains.
To be fair, Monday’s more comprehensive view of the market could show indications of fatigue. And some could argue that’s a bad sign for a riskier stock like Virgin Galactic. It’s possible. But following last week’s burly market rebound out of October’s correction, reading too deeply into one day’s price action as the onset of something more ominous looks misplaced. And with Covid-19 “stay away” stocks like Carnival (NYSE:CCL), Delta (NYSE:DAL) and others finding a reflexive rotation on the session, remaining at arm’s distance from more fearful overtures makes even more sense.
SPCE Stock Monthly Price Chart
So, where does that leave SPCE?
Walking the isle between Virgin Galactic’s ardent bulls such as InvestorPlace’s Matt McCall or Louis Navellier and SPCE stock’s legion of bears which maintain short interest upwards of 90%, I’d simply say, “it is what it is” when it comes to shares. One group of investors is going to be a casualty. And right now on the price chart of this hotly-contested battleground stock, it’s a triangle pattern on the long-term monthly chart that has our undivided attention.
Consolidation patterns like the one shown on SPCE stock’s monthly price chart can provide explosive returns for bulls or bears once pattern resistance or support is broken. And a larger formation like Virgin Galactic’s has the technical earmarks of being a good one.
As it stands, I’d give the edge to bullish investors. Shares are up more than 76.5% year-to-date, despite a rather large narrowing of price over the past several months. Not only does that demonstrate stealth relative strength, but triangles of this kind also maintain a slight edge as continuation patterns.
However, I wouldn’t buy shares of SPCE today. If November’s lows fail to hold, the situation could turn technically ugly. And with that, single digits in 2021 wouldn’t be out of the question.
The Bottom Line on SPCE Stock
Overall, I’d monitor shares for a move through $22. That’s roughly 7% to 8% from current levels, and not terribly far away for a highly-volatile stock like SPCE. If pattern resistance is broken and backed by a bullish crossover in a firmly neutralized stochastics indicator, investors will have a nice spot to buy SPCE stock with $2 to $5 of downside risk based on the triangles apex or support lines versus a favorably skewed Fibonacci-based profit-taking objective of $31 to $35.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.