You might be trying to find fundamental, technical, or analytical setups this week…
But it could be so much easier for you.
Never underestimate the stupidity of retail traders.
There’s a lot more dumb money in this market than you think.
When a sector gets red hot, retail traders start buying any name that’s even remotely related to that sector. And there’s actually money to be made on those dumb setups.
The trick is to think like a social media/WallStreetBets/degenerate trader. Ask yourself: where would they put their money today?
When SpaceX announced its plans to IPO, my first thought was: where does the dumb money go?
This is my #1 setup…
The News
On Tuesday, American Airlines announced a deal to equip over 500 of their planes with Starlink. A bunch of space stocks moved on the news, including one in particular I’ve been keeping my eye on.
Virgin Galactic Holdings, Inc. (NASDAQ: SPCE) is a space tourism company owned by Richard Branson.
The company initially projected flights by 2021. To this day, it has never sent a single commercial flight to space.
The stock has been destroyed, but now it’s at an interesting spot:
SPCE has $251 million in cash on the books as of March 31.
The entire market cap is $249 million.
And now, the ticker itself is making the setup even more intriguing…
Ticker Confusion
I know this sounds hard to believe. But if you went out and asked a hundred traders to find the SpaceX ticker, you would be shocked at how many of them type in SPCE.
SpaceX has already confirmed the stock will be listed as SPCX. But there are plenty of retail traders who will search “space” and buy SPCE by accident.
It might sound insane, but I’m telling you this is a real thing. And it’s a big reason why I was long SPCE before the space stocks moved on the American Airlines news yesterday.
But a thesis isn’t enough to put money on. I needed to see the chart confirm it.
On Friday, we got an increased volume day and a close above the 200-day moving average. That was enough for me. The thesis was built. I got in.
Know What You’re Holding
This is a hype trade. I know exactly what it is and I’m holding it that way. I don’t think SPCE is gonna suddenly become a real business.
Trades like this can move fast in both directions. The same retail confusion that pushes it up can evaporate overnight. You size it right, you watch it closely, and you don’t fall in love with it.
You can see this dynamic every time a sector gets super hot. There is always a name that retail drives up for almost no reason. Most serious traders laugh at it and move on. But that’s a mistake.
The next time you see a sector exploding, and there’s one name in the blast radius that seems too dumb to touch, ask yourself one question: how many retail traders are buying this right now because they don’t know any better?
The answer might surprise you.
Stay sharp,
Jack Kellogg
*Past performance does not indicate future results
