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How to Trade Virgin Galactic as ARK Launches Space Exploration ETF

ARK Investment Management is launching its latest ETF, the Space Exploration and Innovation ETF. Let's look at Virgin Galactic as space stocks are propelled to the forefront.

It’s an exciting and an interesting day for space stocks like Virgin Galactic  (SPCE) - Get Virgin Galactic Holdings, Inc. Report.

Shares were trying to gain some upside momentum, rallying more than 2% on the day as Ark Investment Management launches its space-based ETF, the ARK Space Exploration & Innovation ETF  (ARKX) - Get ARK Space Exploration & Innovation ETF Report.

Included in the portfolio will be Virgin Galactic, it’s not in the top 10, although it is in the top 20.

The top three holdings include Trimble  (TRMB) - Get Trimble Inc. Report, the 3D Printing ETF  (PRNT) - Get 3D Printing ETF Report and Kratos Defense  (KTOS) - Get Kratos Defense & Security Solutions Inc. Report.

The top 10 also includes Boeing  (BA) - Get The Boeing Company Report,  (JD) - Get Inc. Report and Lockheed Martin  (LMT) - Get Lockheed Martin Corporation Report, among others.

In any regard, it’s a bit of an odd time in the market. High-growth stocks have been punished, which are a key focus for a number of ARK’s holdings. It’s one reason why ARK has also been in the news so much lately.

Further, the forced liquidation from Archegos Capital also has some investors looking toward ARK, as much of the selling was in tech and growth stocks.

For Virgin Galactic, the stock is also in focus as it unveils its new ship.

Boeing is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells BA? Learn more now.

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Trading Virgin Galactic

Daily chart of Virgin Galactic stock.

Daily chart of Virgin Galactic stock.

Virgin Galactic stock was under pressure in premarket trading, briefly dipping below last week’s low. However, the stock is pushing higher off that area, holding nicely above $27.50.

With that said, shares are sort of in a strange area right now. On the one hand, the 10-day and 21-day moving averages continue to act as resistance. On the other hand, $27.50 continues to hold as support. It's stuck in the middle. 

One of these areas will have to fail for us to get a large move in the respective direction.

If support gives way, I really want to see shares test down into the 200-day moving average and uptrend support (blue line). This area held as key support earlier this month, marking the March lows.

Should Virgin Galactic stock test down into these marks and they fail as support, it will put the March low in play near $24.

On the upside, let’s see if we can get a close over the 10-day and 21-day moving averages. Above opens the door to that $35.75 area, which has been somewhat key to this name over the last four months.

Above $36 and the 50-day moving average is potentially in play.

While these types of stocks are out of favor at the moment, we must keep an eye on downside support levels and be on the lookout for key rotations higher.