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Stock Idea: Rocket Lab USA
A stock that could have decent potential over the next 6-12 months is Rocket Lab USA (Symbol: RKLB). Rocket Lab is an end-to-end space company delivering reliable launch services, spacecraft, satellite components, and on-orbit management. As a global leader in launch and space systems, they are transforming the way we access and use space. A recent Barron’s article said “Rocket Lab is quietly emerging as a SpaceX Competitor.”
Technicals – The stock is working on a rare, high tight flag pattern. It’s basically when a stock doubles in a short period of time and then barely gives anything back. My interpretation is that there is strong institutional accumulation beneath the surface, as seen in the tight closes on lighter volume over the past few weeks. These rare patterns can often lead to strong moves. If you’re interested in reading more about this pattern, there’s a website called Google where you can look up the definition.
Fundamentals – The company started with Electron, its small satellite launch. Now, they are developing their next generation launch vehicle called Neutron. Electron has seen approximately 53 launches and deployed 197 satellites for a diverse range of customers and missions, but is limited at 300kg lift capacity to Low Earth Orbit (LEO). The Neutron rocket will be able to handle approximately 13,000kg lift to LEO. This is a huge opportunity for Rocket Lab to compete more directly with SpaceX’s Falcon 9 and other medium-class launchers. In addition, their efforts to increase rocket reusability is seen as a potential game-changer. RKLB has a market cap of $4.8B and trades 9.3X EV/Sales with revenues seen rising 75% in FY24, 40% in FY25 and 45% in FY26 while EBITDA profitability inflection seen in FY26.
Unusual Options Activity – RKLB has seen plenty of bullish options positioning over the past two months with 3900 December 2026 $12 calls bought, 1175 June 2025 $20 calls bought, 5000 April $17 calls bought, and 3500 November $17 calls bought. This data is provided by OptionsHawk. Please visit his website to learn more about unusual options activity.
Full Disclosure – I currently hold a position in this stock for clients. I started the position around the $6 level and added this past week off the potential high tight flag formation. These purchases were also disclosed to my Educational Members. If you’re interested in becoming an Educational Member, you can sign up here.
The purpose of this blog post is to show you how I combine technicals, fundamentals, options activity, and other factors to help increase my probabilities of success. Please understand that this is a speculative idea and not suitable for everyone. Also, it’s impossible to guide people how to trade any idea because everyone has different time frames. If the market cooperates, I feel the stock can appreciate 30-50% over the next 6-12 months. The stock closed Friday (10/11/24) at $9.70 and should have strong support in the $6-7 range. Good luck!
I can be reached at: jfahmy@zorcapital.com.
Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this blog. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.
Why Sentiment Changes So Quickly
Earlier in my career, it used to take about 2-3 months for sentiment to change from being bullish to bearish (and vice versa). Now, it feels like it only takes about 2-3 weeks. Here are some reasons why.
1) We have so much information in real-time, especially our account balances. Years ago, people used to get monthly or quarterly statements from their brokerages. Now, everyone has their net worth available on their phones in real-time. This constant watching of balances and overkill of visibility is leading to higher levels of emotions. In addition, there are so many bloggers out there, multiple financial networks, and endless social media platforms inundating us with a lot of noise. They mostly promote fear because that’s what gets the views and keeps the ratings high.
2) We live in the most impatient world ever. Most people do 10 sit-ups and complain that they don’t have washboard abs. In the markets, most people want to make $10M in two days.
3) Because of this impatience, people are using A HUGE AMOUNT of leverage. Leverage includes options, weekly options, 0DTE options (over 50% of the options traded every day expire by the end of the day), futures, leveraged ETFs, options on leveraged ETFs, margin, and aggressively large position sizes. Therefore, when the market has a normal pullback, too many people get wiped out. Also, this isn’t just occurring with retail traders. Many institutions are using insane amounts of leverage as we have seen recently with the yen carry trade.
4) We live in the weakest generation of people ever. If this offends you, then you are one of them. This week is a perfect example. The same people who complain that the Fed is interfering too much in the markets were screaming for an emergency rate cut on Monday because the market was gapping down 2-3%. This overall weakness leads to extreme levels of fear very quickly when, most of the time, it’s just a normal pullback for the markets.
I will be discussing this in more detail this week on The Compound and Friends podcast and will post this link here after the recording becomes available.
I can be reached at: jfahmy@zorcapital.com.
Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this blog. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.
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