How I’m Trading SpaceX Earnings as Rotation Gains Traction
Money is moving out of tech ahead of the big reports, and Oscar Health just gave me a reason to add.
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The rotation I wrote about this morning is picking up speed. Breadth is running about 63% positive, and money is moving out of the Invesco QQQ Trust (QQQ), the Roundhill Magnificent Seven ETF (MAGS) and the VanEck Semiconductor ETF (SMH), which is down about 1.3%. Data center names are still under pressure as well. The money is flowing into small-caps, defensive pharmaceutical stocks, oil, retail and banks.
This is the kind of action the indexes have been hiding for months. The Nasdaq is lower, but more stocks are up than down, and many of the names that have been ignored all year are finally getting some attention. One day doesn’t make a trend, but this is what the start of a catch-up trade looks like. Managers who are behind their benchmarks have a reason to sell some of their AI winners and put that money to work in the laggards.
The pressure on the data center names also sets the stage for tonight. SpaceX (SPCX) reports into a market that is already selling the group, so the stock goes in with nervous holders rather than eager buyers.
Trading SpaceX Into the Report
The big test comes after the close when SpaceX reports. I’m bullish on the stock long term, but I’m not going to bet on the report’s outcome.
Oppenheimer’s Timothy Horan expects another strong quarter. He notes that demand for AI computing power continues to outpace supply, and that Wall Street expects cloud capital spending to grow about 75%. He also points out that SpaceX earns back its investment in data center capacity in less than a year because customers pay premium prices for computing power they can use right away. Few companies in this group can say that.
The problem is that the stock doesn’t trade on the numbers alone. Last quarter, the leading tech names beat on both the top and bottom lines and still sold off. Even Oppenheimer acknowledges that access to more capital is a risk, along with high spending forecasts for 2027.
SpaceX is spending heavily on data centers, chip manufacturing and Starship, and it needs outside money to fund it. If investors focus on the cost rather than the growth tonight, the stock could easily go through a deeper correction, regardless of how good the quarter is.
I’m holding my existing position into the report. It isn’t a full position, which gives me room to act on either side.
If the stock gaps down on capital spending worries, I’ll be looking to catch the overreaction for a bounce trade. A sharp drop on a quarter that confirms the growth is the kind of gap between the news and the price move that creates opportunity.
If it gaps up, I may reduce some of my position into the strength. I don’t expect sustained momentum in the AI names right now, not with money rotating out of the group and investors questioning every dollar of capital spending. A gap up would be a chance to lock in some gains and rebuild later at better prices.
Game Plan
The rotation is encouraging, and I’m itching to put more cash to work. But I’m forcing myself to stay patient and let the charts develop. One good day of breadth after weeks of damage isn’t enough to change my approach, and I have tight stops on the positions I still hold.
An exception is Oscar Health (OSCR), which I highlighted yesterday. The company announced its 2027 lineup this morning, and the news reaffirms my view of the stock. Oscar will offer plans in 713 counties across 21 states next year. That is a 24% increase in its footprint, including a new entry into South Carolina. It is also adding a plan for early retirees, expanding its menopause-focused coverage and bundling dental and vision into more than 250 plans. More than 250 of its products will be available through arrangements that let employers give workers money to buy their own individual coverage.
That answers the main worry that hit the stock last week. The market read Oscar’s large rate increase in Georgia as a sign the company is pricing itself out of growth. A company that is shrinking doesn’t expand into more counties and launch new products ahead of open enrollment. This company is taking share in a market its competitors are backing away from.
Open enrollment starts Nov. 1, and the stock is holding above its 50-day moving average. I’ll look to add to Oscar a little more aggressively, and I still treat a break below $30 before the Nov. 5 report as a sign I’m wrong.
At the time of publication, Rev Shark was long OSCR and SPCX.
