How to Trade Virgin Galactic Holdings Now

Space tourism definitely has the sexy factor, but so far, making money off the movement has required an appetite for insane volatility. Even then, the absence of an uptrend and sustained price progress for Virgin Galactic Holdings (NYSE:SPCE) stock and others has required hit-and-run tactics to capture gains. Those overstaying their welcome have seen paper profits disappear.

Virgin Galactic (SPCE) billboard on the New York Stock Exchange, across from the Fearless Girl statue. aerospace stocks
Source: Tun Pichitanon / Shutterstock.com

The case for SPCE hasn’t so much been a failure to launch as much as it’s been an inability to maintain altitude.

This year has hosted two epic runs. The first delivered a 170% gain in a little over one month. The second was equally eye-popping, with a jump of 303% over six weeks. Being on the right side of such outsized rallies can be exciting and lucrative.

On a side note, this is one of the main reasons for Virgin’s popularity. How many other stocks have generated back-to-back booms of this magnitude?

Not many.

While I’d like to report that SPCE stock is in the midst of another monster run, or perhaps that such a climb is imminent, I haven’t any such good news to share. But, I know which price levels you should watch as the signal that such a run could start. For that, we need to take a closer look at the price charts.

SPCE Stock Charts

Virgin Galactic Holdings (SPCE) weekly stock chart with epic volatility
Source: The thinkorswim® platform from TD Ameritrade

The weekly time frame reveals all you need to know about Virgin’s volatile history. This year’s twin launches were preceded by three such jumps last year. Unfortunately, the same problem has plagued all five episodes – the rallies never stuck. Without fail, bears arrived to dismantle every one, resulting in very little actual progress.

Sure, prices are still higher today ($22.60) than they were at the beginning of 2020 ($11.81), but holding on through the unparalleled volatility has been virtually impossible. To have a chance at riding each wave and then departing once they crested has required close monitoring of the daily trend. In the case of this year’s two bull runs, once we breached the 20-day moving average, the game was up.

In the first case, we cracked this short-term smoothing mechanism on Feb. 22 and ultimately remained below it until the next moon shot. That one generated the same exit signal on July 12. In the three months since SPCE stock has been plumbing the depths in search of a bottom. So far, buyers have gone on strike, and there’s been little technical evidence that their appetite to play has returned.

Virgin Galactic Holdings (SPCE) daily stock chart with downtrend.
Source: The thinkorswim® platform from TD Ameritrade

Watch for a break above resistance at $26.50 to signal the bulls’ return. It’s home to multiple pivot highs and the descending 50-day moving average.

Trade Considerations

Let’s start with the obvious. Bullish directional trades are a fools’ errand until the trend changes. Even if you’re looking to buy shares for the long run, it’s best to wait for confirmation of a trend reversal.

At the same time, I’m not immediately drawn to a bearish trade for three reasons. First, the stock is already down 61% from its June peak. Second, the downside momentum has slowed considerably over the past two months. Third, with the recent market selloff, dozens of interesting bearish charts look better than SPCE.

That leaves two options: do nothing or build a volatility-based options trade.

The high implied volatility of SPCE stock options makes short puts an exciting way to play if you want to bet prices don’t fall too much further from here. Alternatively, you can consider it a way to get paid for willingness to buy shares at a lower price.

The Trade: Sell the November $17 puts for 60 cents.

On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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