Virgin Galactic stock is soaring: is this a dead-cat bounce or start of a rally?

The Virgin Galactic stock price has rebounded this week and is hovering at its highest point since January 28.

It has soared by 45% from its lowest point this year, bringing the market capitalisation to $250 million.

Top reasons why the Virgin Galactic stock has soared 

The SPCE stock has soared in the past few days, helped by some of the top catalysts in the space industry.

One of the main catalysts is the upcoming SpaceX Initial Public Offering (IPO), which is expected to value the company at nearly $2 trillion.

As a result, this deal has led to more demand for companies in the space industry.

The stock is also soaring amid rumours that Amazon will make a buyout bid for Globalstar, a top company in the space industry that competes with SpaceX.

It may place a $9 billion bid as soon as this month. That is a sign that there is demand for companies in the space industry.

Most importantly, the Virgin Galactic stock jumped as the company opened spaceflight ticket sales at $750,000, up by $100,000 from the previous offerings.

The ticket sales comes a few months before the management starts its commercialisation process later this year, possibly in the fourth quarter.

These events come as traders reacted to the recent financial results, which fell short of expectations, which is understandable as the company is still in its pre-revenue state.

Its numbers showed that its revenue dropped to $0.3 million, lower than the $0.4 million it made in the same period a year earlier.

Virgin Galactic made a net loss of over $63 million, better than the $76 million it made a year earlier.

It also reduced its cash outflow to $95 million from $117 million in the previous period.

Still, Virgin Galactic stock faces some major risks ahead, which explains why its short interest has jumped to 20%.

First, as the company has done in the past, there is a risk that its schedule will be delayed.

Second, Virgin Galactic will likely continue diluting its shareholders in the near term.

It raised $12 million in the last quarter by selling shares. Its outstanding shares have jumped to 73.3 million, up from 12 million in 2021.

Third, there is a risk that the ongoing rebound may be a dead cat bounce, a situation where an asset in a freefall rebounds briefly and then resumes the downtrend.

SPCE stock price technical analysis 

Virgin Galactic stock chart | Source: TradingView 

The daily chart shows that the SPCE stock price has been in a downward trend for a long time.

It even formed a head and shoulders pattern, and moved slightly below the neckline at $2.68. 

It bottomed at $2.13 earlier this month and then staged a strong comeback to the current level of $3.07. The stock remains below all moving averages, signalling that bears have prevailed.

Therefore, history shows that the stock will rise a bit as the Fear and Greed Index prevails.

It will then resume the downward trend, potentially to the year-to-date low of $2.13.