Tesla made headlines for the absurd run it wen on a few weeks back. The stock had a pullback before resuming its torrid pace. The stock, once again, crossed the $900 level.
As impressive as this all is, there is a new stock that is taking over for its incredible run.
Over the past 3 months, Virgin Galactic had a 298% increase. This from a company that has no revenues to speak of and is still a couple years away from launching its first space travel flight.
Virgin Galactic might have a sterling future yet it is evident that the stock is far ahead of itself. It is a similar situation with Tesla. Both companies are speculative plays based upon their potential in the future.
Driving the stock at this point is the retail investor.
TD Ameritrade said Virgin Galactic “was among the top names bought by retail investors” bought in January.
Likewise, Fidelity told CNBC that Virgin Galactic was bought more than any other stock on Tuesday — topping Apple, Tesla and others.
The volumes on both the stock and options are more than triple than usual. This is often a sign of a stock that is about to hit a wall. Eventually, there are not enough buyers to keep pace with the buying action needed.
Retailer investors are also usually a sign that the end of a run is near. They are usually the last ones to get into the game with the smart money looking to take profits.
Both Tesla and Virgin Galactic enjoyed incredible runs. The challenge is they both appear to have gotten ahead of themselves.
Is this a sign of a wider market problem or simply isolated to a couple of stocks with an emotional fan base? Absurd valuations tend to coincide with market tops.
Whether Virgin Galactic succeeds or not is not the topic of the day. For right now, this is just a stock that had an incredible run based upon an abundance of emotion.
This is not financial advice but corrective action is likely.
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Posted via Steemleo