Rocket Lab Price Target 'Under Review' With Stock in a Bad Spot
Here's my updated plan and what you need to know as the stock comes under pressure.
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You may noticed that Rocket Lab USA (RKLB) is and has been under intense pressure. Even up a few hundred percent, depending on when you followed us in (this column is labeled 'Stocks Under $10' for a reason), giving back almost 30% in a few weeks is painful.
Readers might remember that about two and a half weeks ago, I gave you the 50-day simple moving average (SMA) as the add level for this name. Well, the stock tested that level on Wednesday, but it did hold. Alas, the stock has crashed right through that level Thursday morning.
Remember, levels are not broken when they are pierced, they are broken when contact is lost. The 50-day SMA currently stands at $55.60. I see the stock trading at $52.40-ish, as I write. That's an awfully long way to have to come back in order to maintain contact for tomorrow.
Take a look at the chart:
This is a classic example of why we always do something, even if it's just a small sale, when our price targets are reached. Our target before we increased it in late October, had been $74. The stock apexed at $73.97. Hopefully most of us made some kind of sale when the stock failed at that level three times within a few days and then started to come in.
The reason for this urgent message is that I am not adding at my add level and for a good reason, though I will if the 50-day line is retaken by tomorrow (Friday.) I want you to see what I think I see, but hope I do not...
Shield Your Eyes
Is RKLB two-thirds of the way into developing a head-and-shoulders pattern of bearish reversal? If it is, we have not yet created a downside pivot. What we do know is that it will be lower than this. We also know that if that pattern does indeed develop, that the 200-day SMA, which is our panic point, will come under fire soon enough.
The indicators that I like to use are not helpful at this time. Relative Strength has fallen out of bed. The daily moving average convergence divergence (MACD) is now quite bearish in posture. The histogram of the 9-day exponential moving average (EMA) is deeply negative, while the 12-day EMA is now well below the 26-day EMA and that gap is spreading.
Sell some now? It's not optimal at these levels, but the stock is in a bad spot. I already took off a minority portion of my long position, but I am not selling any more at this time ahead of earnings. If one is up a lot and one is nervous, increasing the cash position does calm the nerves.
Keep in mind that Rocket Lab will report its fiscal third-quarter financial results after the closing bell on Monday, November 10. Wall Street is looking for an adjusted loss per share of $0.06 on revenue of about $151.75 million. That would compare to the year-ago comp of -$0.07 but would reflect year-over-year sales growth of roughly 45%.
Price Target: cancelled, under review (had recently been $85, up from $74)
Pivot: 50-day SMA (currently $55)
Add: I am not right now
Panic: Loss of the 200-day SMA (currently $36)
At the time of publication, Guilfoyle was long RKLB equity.
