Some might call it a moonshot. I’m talking about this week’s price action in Virgin Galactic (NYSE:SPCE). But is now the time to be boarding SPCE stock as a bull or bear?
Source: rafapress / Shutterstock.com
Let’s take a look at what’s happening off and on the SPCE price chart, then offer a risk-adjusted determination aligned with those findings.
Houston or rather “Wall Street, SPCE stock has lift-off.” Well, kinda sorta.
Blasting Off Again
On Tuesday, Virgin Galactic shares, and one of the market’s more notorious meme stocks, were sent throttling higher by 32%.
But the bullish reaction wasn’t entirely monkey business by Reddit’s bullish apes or SPCE’s 21% of bearish short interest deciding to abort, though both played a likely role.
Tuesday’s rally in the soon-to-be space tourism operator’s shares followed news Virgin Galactic was opening ticket sales to the public the next day after already selling 700 tickets to its registered “Spacefarer community.”
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And with seat’s rocketing in price from $250,000 to $450,000 this past year and well above today’s scorching inflation rate, there’s obviously a great deal at stake for SPCE with commercial operations still on the proverbial launch pad.
CEO Michael Colglazier had other news too.
Flights on VSS Unity and Eve will commence in the fourth quarter with its first 1,000 passengers, following Virgin’s billionaire front man Sir Richard Branson’s successful extraterrestrial voyage this past summer.
To be fair, it’s promising. But the latest is still far from a clear cut, blue skies forecast for SPCE stock.
For one, there’s still the Unity 23 test flight to get past before paying passengers ever have the chance of enjoying zero gravity. And as it stands, a date for that mission hasn’t been set.
Trouble and Make It Double
There’s also a bit of bad blood between shareholders and SPCE.
Virgin Galactic has lost some investors’ trust and interest with continued dilution this year, insider selling in 2021, as well as past scheduling failures and technical glitches.
Letting bygones be bygones may not come easily.
Amazon (NASDAQ:AMZN) founder Jeff Bezos’ Blue Origin project or even Tesla (NASDAQ:TSLA) CEO Elon Musk’s SpaceX venture are also still-to-be-determined risks.
Lastly, and for what it’s worth, Cathie Wood’s Ark Invest is no longer shooting for the stars in SPCE stock.
A long stock position in Virgin Galactic, which at one time totaled more than a couple million shares, was liquidated last year.
And despite the investment manager’s dismal performance in 2021 and thus far in 2022, that lack of institutional support is bad for business. Well, at least for apes in the business of promoting Cathie’s every move.
SPCE Stock Weekly Price Chart
Click to EnlargeSource: Charts by TradingView
Obviously SPCE remains a popular battleground stock with potential drivers for bulls and bears.
Today though, and despite the challenges, the technical evidence is looking supportive for a meaningful long-term bottom in Virgin Galactic shares to emerge.
Much can be said about this week’s 32% jump in the price of SPCE stock. But shares have also been chopped down to a market cap of about $2.4 billion.
Overly-bullish sentiment associated with this past summer’s peak valuation of $13.50 billion is no longer a worry. Greedy bulls have paid the price.
And technically, the 80% decline in SPCE shares since June has set up an attractive-looking lifetime double-bottom pattern and test of angular support tied to an extended triangle formation.
Coupled with an oversold and bullish stochastics crossover and monthly chart inside doji candlestick, SPCE stock looks close to an all systems go scenario for a new bull market.
For investors wanting to allocate risk capital into Virgin’s growth narrative, “leasing” a seat in SPCE stock with a limited risk, bull call spread is a favored strategy.
This type of position is aligned with the forecasted bottom to be confirmed in the days ahead and for a rally to unfold. That bias, along with this position’s reduced premium, makes it a compelling choice for bulls.
And given where SPCE has been and where it might less-boldly, but still profitably go in the coming months, the July $11/$17 call vertical looks agreeable off and on the price chart.
On the date of publication, Chris Tyler holds long hedged positions (either directly or indirectly) in Ark Innovations and Genomics ETFs (ARKK, ARKG). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.
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