Did Ancient Math Call The Top In Virgin Galactic?

Shares of Virgin Galactic, like Tesla, experienced a remarkable run in the first half of February, only to see its gains deflate on the company's first earnings report as a public company. Over the course of a week, shares have fallen 50% from its $42 high to where it is today @ $22. While it's difficult to call tops and bottoms, in technical analysis, there are tools that can help you identify potential areas of give and take/push and pull between buyers and sellers, which tends to represent a favorable level to take profits after an extensive run higher.

One such tool that helps identify these ares of potential support/resistance is fibonacci analysis, based off of the ancient mathematical equation. Applying fibonacci extension analysis to an emotional high and low on a stock chart yields golden ratio price targets that in my experience, more often than not, identify key inflection points in a stock before they happen.

Cue this messy chart of Virgin Galactic. The blue is the intraday high and low, while the red is closing price high and low of shares in late 2019. The 423.6% extension level of $29 - $32 marked a highly likely distribution zone, where you'd want to take profits. While you didn't catch the $42 top, you booked profits in a disciplined manner. Technical analysis is a helpful tool to help navigate markets, but it's not the only tool. Use all the tools you can in whichever way works best for you to stay a disciplined and focused trader/investor.


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