The Macro/Technical Blend
When I first started trading, my knowledge of the macro side of things was, let’s just say — limited. I focused on patterns and patterns alone.
However, over time, my trading has evolved, and this week, my primary focus this week, from my Short Interest Secrets class, has been a gorgeous short squeeze plus a strong macro backstory in Richard Branson’s space exploration company, Virgin Galactic (SPCE).
Here’s what’s been playing out…
SPCE — heading off to outer space, in a fantastic short squeeze.
So, what makes a short squeeze pattern so special?
It’s a specific pattern, with data and a story to back it up, that can equal explosive moves — and it’s exactly what we’re seeing right now in SPCE. With high short interest, high borrow fees, and an upcoming earnings report, it keeps squeezing shorts and blasting off to never never land.
Technicals are one thing… but the macro story here is critical as well.
Here’s a screenshot of my SPCE trades today:
Technicals and patterns, this is how I make my living.
But, did you know I have a secret weapon?
My husband is a bit of a space enthusiast, with a macro background and understanding of this ticker that’s allowed us to make a couple thousand dollars today alone on the trade.
We’ve talked about the technicals in nightly videos (like this one here), in my Mastery, during the class, and trading room… but all of this is just a pattern on top of macro analysis.
So I thought I’d ask Darrell for his macro take. Here’s what he said:
In late 2018, quietly, a huge milestone was achieved. American pilots flew an American-built spacecraft above the atmosphere, and safely landed again. It wasn’t Elon Musk’s SpaceX, or Jeff Bezos’ Blue Origin, or even space and defense stalwarts like Boeing ($BA), Lockheed Martin ($LMT), Northrop Grumman ($NOC), Orbital ATK ($OA), or others. It was Richard Branson’s space tourism startup, Virgin Galactic ($SPCE).
Space exploration has always been exciting and evoked emotional responses, even from the very beginning of the industry. Anyone who was alive at the time can tell you where they were when they watched the Apollo moon landings, or read the news about Sputnik, Yuri Gagarin, Alan Shepherd, or John Glenn’s historic flights.
Those from my time can tell you how they felt about the Challenger and Columbia disasters, or how they felt watching the last Space Shuttle launch and land without incident as the US space shuttle program winded down in 2011. The era of manned space exploration from NASA and the USA has been on hiatus since that time (though the US has maintained crew on the International Space Station with the assistance of the Russians).
Sure we’ve had some excitement in human spaceflight recently: SpaceX is within a couple months of launching US Astronauts to the International Space Station for the first time from American soil since that last Shuttle flight in 2011. They are also deep into development for their next new exciting interplanetary exploration/colonization architecture known as Starship and Super Heavy. Boeing is close behind with their Starliner spacecraft which will also launch US astronauts to the ISS, on ULA (United Launch Alliance, a partnership between BA and LMT) rockets. NASA itself is within months of full scale testing of their next-generation rocket, the Space Launch System (SLS) that is projected to take humans to the moon within the next decade.
But there’s a problem for us investors: There aren’t many ways to invest in a pure space company today.
If you want to invest in a space company now as a retail investor, you’re pretty much limited to a few select tickers. There’s Iridium (IRDM) with their satellite communications network and solid business case for it. It’s something I could imagine having in a slow long-term growth account, but I wouldn’t call it exciting. There’s also the standard defense stocks I listed earlier, but the majority of their influence isn’t in the space sector (that’s just a small portion of their stocks’ performance).
Then there’s Virgin Galactic. Nobody knows what to expect: We’ve never had a pure space play like this before. We know their plan. They just moved one of their spacecraft and its airplane carrier ship to the New Mexico Spaceport, and are preparing to fly paying tourists in June of this year. We know people are very excited about space, and there will be a lot of coming news cycles dedicated to chronicling future human space travel, especially when it’s something any average person could achieve (with a ticket worth a couple hundred thousand from Virgin Galactic).
The excitement is just getting started, and even though Virgin Galactic has already doubled it’s initial price from October last year, unless an unforeseen setback emerges SPCE will be the repository of the retail investor’s excitement in the space sector as a whole. There are risks indeed. Any test failure, or heaven forbid another loss of life, would be devastating to the company. For the time being however, with the massive short float and huge potential for additional investments in the near future as more awareness filters down to the retail investor segments, the sky is no longer the limit.
Disclaimer: I have been long SPCE from $17 and will continue to hold for the foreseeable future.
And that, is how you take a macro backstory, mix it with a technical pattern (the short squeeze!), and use it to make money. Thanks to my husband for all that additional insight!
