Rocket Lab Price Target Appears Out of Reach After Market Downturn

OK, I'm not going to go on and on about the hate mail. Enough whining from me. That said, we have other stocks that need to be addressed, and another personal favorite, Rocket Lab (RKLB)  is one of them. 

By the way, Rocket Lab is my fourth-largest holding (so I really got punched in the nose last week).

Readers will recall that I covered Rocket Lab earnings last Tuesday. The stock rallied sharply that morning after what was seen as posting a solid quarter. Like  (SOFI) , the stock hit resistance at pivot. Never a good sign. Unlike SOFI, while this business is growing like a weed, it is not yet profitable. This causes problems when traders and algorithms posing as traders rotate out of overvalued growth stocks into anything else.

That Said...

Though I did reset my target price as the stock approached its pivot, which was the 50-day SMA, I was gone by the time this stock failed at that level. I did, however, warn that a head-and-shoulders pattern of bullish reversal was about two-thirds of the way into its development and that that could cause the stock to fail. That was in my Tuesday note. Still, I was optimistic and this is what I gave readers:

As I write this, the stock is down almost 5% on Monday morning, down 24.1% from last Tuesday's high and down 41.5% from its October highs. Again, this is why we take some kind of profit at each target price breached when we move on to a higher target.

For those who did not get in at single-digit prices with the rest of us, this is why we have our 8% rule. If a disciplined trader/investor enforces his or her 8% rule, that individual will never take a serious beating except in rare circumstances.

I sometimes make exceptions to the 8% rule in stocks that trade under $10 when they are still trading below $10. Additionally, there are occasionally times where a stock will lose significant value overnight while one is sleeping. That is rare though, as one is usually aware of where one's stocks are trading after regular market hours.

The Chart​

I did add to this position on Friday. I have not yet added on Monday and may not. ​I am no longer seeing this as a developing head and shoulders, though it still could be. It looks to me as if RKLB has set its sights on its 200-day SMA. I am holding off my next purchase until I see if the stock tests that level from above.

For now, the 50-day would still be considered the upside pivot, but realistically, something else will likely become visible and a lower pivot will produce a lower target price. 

So, I am sorry about the $70 target, but that's not about to happen, or at least I don't think it will. That said, I would rather buy shares on upside momentum and miss these prices in the lower $40s than add here and watch the shares move into the mid- to high $30s. I will eventually add to RKLB. Not here. Not now.

At the time of publication, Guilfoyle was long RKLB and SOFI equity.