Virgin Galactic (NYSE:SPCE) is the only public option for space travel investing today. Therefore, SPCE stock is by definition a buy-and-hold for the long term. Own it now for a decade or longer. When commercial space travel becomes more ubiquitous this stock will be huge. Meanwhile, active traders can also time the shorter-term price action. Specifically, if the bulls can take it above $29.5 per share they would invite more buyers. The rally could have another $7 in it from there. Knowing the long-term outcome makes it easier to have conviction against near-term dips.
Fundamentally it’s useless to dissect SPCE. It’s too new and has virtually no sales. The current stock price is pure hopium on what’s to come in the future. Those who back it are famous billionaires who don’t make it a habit of losing.
The list includes two major high profile Wall Street figures: Chamath Palihapitiya and Richard Branson. I am comfortable betting a little of my money with these guys. I like the company of such proven winners. These guys will do what ever necessary to succeed in this venture.
The Bulls Are in Charge of SPCE Stock
The short-term price action has favored the bulls as we already noted above. While this is good news, it’s also a concern near term. The odds of more upside dwindles and the pullback becomes almost necessary. It has to rest near $30 so that the ownership transfers hands. That’s the process by which Wall Street shakes out the weak bulls. The new owners of SPCE stock would have better conviction to tackle the resistance from last week.
The stock rallied almost 70% in November, so it’s only natural the stock rests. Giving back some of the greens is almost a requisite to maintain a healthy slope on the chart. In fact, this happened in June when the rally was slightly bigger than this. It too ended in a correction. SPCE stock lost 45% from the $28 peak back then. For the last few months, the stock spent time consolidating to build a stronger base. It even had a nice rally in October.
Staying long the stock makes all the sense in the world through these corrections. Those who want to participate should take advantage of these dips. 2020 was an incredibly tough year for stocks so the lows that SPCE made should stand for a long time. Of course there are no sure bets on Wall Street, but this is the only one on space travel.
There Will Be Competitors Soon
I have no doubt that humans will be zipping through space commercially in the future. How close to now is the mystery, but Virgin Galactic has a running start. There will be risks from new entrants, especially when I mention my next picks. Odds are that either Elon Musk’s Space X or Jeff Bezos’ Blue Origins will come to market next. They already have the technology to get there, so all they need is the support infrastructure.
These two fierce leaders have proven they can succeed with Tesla (NASDAQ:TSLA) and Amazon (NASDAQ:AMZN). They have disrupted many industries and they are fighting it out hard already. Eventually SPCE can ride the wave of interest that they would bring to the commercial space race.
In the beginning they will be gorillas to roil SPCE stock investors a bit. At the very least they will steal bids from the incumbent. But in the end, having two other monster competitors will legitimize Virgin’s efforts in this intrepid venture. To this point, few people are thinking about booking tickets to the moon.
I have written about bullish opportunities before. But when it has already run quiet a bit, I usually suggest selling puts for income instead of chasing. These are bullish trades that don’t need rallies to win. Selling a put below would even allow for a correction in SPCE stock and still book maximum profits. An example today would be to sell the January $22 put and collect $1.5 for it. All I need to win is for price to stay above $22. This means that even if the stock falls 15%, I still profit. Otherwise, the breakeven for this is at $20.50.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.
