Highly Speculative Aviation Shares Go Vertical After Air Taxi Innovation Turns Heads
VTOL aviation stocks are taking flight as the technology grabs investors' attention.
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Shares of Joby Aviation JOBY took flight on Thursday on news that the company is doubling its production capacity at its Marina, California facility. The site is expected to produce up to 24 aircraft per year.
Joby Aviation made headlines earlier this month when it announced a planned air taxi service in Dubai. The service is likely to begin late this year/early next year.
What Is VTOL?
Joby aircraft belong to a class described as vertical takeoff and landing, or VTOL. Basically, a VTOL vehicle is an airplane, but with the maneuverability of a helicopter.
A VTOL can take off and land without the use of a runway. These aircraft resemble conventional airplanes, but with rotors similar to those found on a helicopter positioned on their wings.
Joby’s chief competitor in this space, San Jose-based Archer Aviation ACHR, is planning a similar air taxi service in Abu Dhabi. Archer’s all-electric VTOL, dubbed Midnight, recently began test flights in the United Arab Emirates.
Important Caveat
Before we pull up the charts for Joby and Archer, investors need to understand that both of these names are highly speculative. These are small, unprofitable companies on the cutting edge of aviation technology. In the future, larger, more established aviation competitors could swoop in and alter the dynamics of the VTOL space.
Joby Takes Flight
Ironically, shares of Joby Aviation have gone vertical. Over the past week, this stock has jumped from $12 to $17.50, for a gain of about 45%. Over the past two sessions, daily turnover is approximately double the stock’s average volume (shaded yellow). Joby is scheduled to report earnings on August 7.
Joby is trading well above its rising 50-day (blue) and 200-day (red) moving averages. The stock is heavily overbought, registering an extreme relative strength index (RSI) reading of 86.30 (lower right corner of chart).
That RSI reading doesn’t necessarily disqualify the stock. Stocks often experience their greatest momentum gains while registering an overbought RSI.
Archer Aims High
Archer Aviation is also scheduled to report earnings on August 7. This stock’s RSI reading is 69.96, just below the overbought level of 70. Archer has formed a saucer pattern (shaded yellow) which projects the stock to the $17 area.
Here’s the Plan
Since these are volatile, speculative names, there’s no need to go all-in. I’ve opened small positions in both Archer and Joby, and will add to those positions if and when appropriate. These are momentum stocks in a momentum market, so investors will need to be alert and nimble.
At the time of publication, Ponsi was long JOBY and ACHR.
