How to Steer Rocket Lab

I keep a close track on three former "Stocks Under $10" portfolio names: SoFi Technologies SOFI, Palantir Technologies PLTR, and Rocket Lab USA RKLB, which we'll look at today.

All three names, however, have done well for us, so expect me to continue to keep track of them for my readers, regardless of whether the names remain small caps or trade above or below $10. I, of course, am long all three of these stocks, as my money is indeed where my mouth/keyboard is. The leader of that pack is Palantir Technologies, which I covered at TheStreet Pro, as it enters the S&P 500 and has now graduated to a more mainstream audience. The other two, SoFi Technologies and Rocket Lab USA are just as key to our success at investing in smaller-cap or lower-priced stocks and are key to how well I am able to set up my children and grandchildren as well. 

I think these smaller names, including Rocket Lab, will do better overall in a lower interest rate environment. After all, the Guilfoyles are an honored and mighty clan, and I do not want to be the one who lets them down. I explained why I see positivity in the short- to medium-term future, at least for SOFI, in this morning's Market Recon column. We'll get after SOFI in another piece devoted solely to that name. Today, let's "do" Rocket Lab.

Charting the Rocket 

I last addressed RKLB for the Stocks Under $10 crowd back on Aug. 9, after the second-quarter earnings release. I updated the name in a brief post at the Doug Kass Daily Diary a week later. We know that the business has been improving only methodically as far as profitability is concerned, but at a somewhat impressive pace in terms of sales. We know that the guidance has been conservative, and that operating, and cash flows are not yet positive, but that the balance sheet remains clean. Our $7.50 target price has now been kissed four sessions in a row and could be developing into a level of resistance.

On the one hand, the falling wedge pattern that we had talked about in the past did produce the rally we expected, and the stock did hit $7.50. That's a win. We do something at target ... sell small or do something else, but with a solid, explainable reason. Don't be a Jerome Powell and act without being able to explain why. Good enough, but what now?

Here, we see that the stock's Relative Strength has remained strong, while the stock's daily Moving Average Convergence Divergence has wobbled, but is currently postured quite bullishly. The action since the falling wedge pattern bottomed, fits fairly neatly into an Andrews' Pitchfork model, with current pressure on the upper trendline from below. But the same spot seems to be fertile ground for a double-top reversal.

That's food for the bears. I am a Rocket Lab USA bull, but a bear would see this double top with a $5.75 downside pivot and would then set a downside target. I see the upper trendline and recent $7.50 level as my new pivot, meaning I have to increase my target price.

Rocket Lab Plan

Target Price: $9.50 (up from $7.50)

Pivot: $7.50 (up from $5.85) Add: down to the 50-day simple moving average (currently $5.86)

Add: down to the 50-day SMA (currently $5.86)

Panic: Loss of the 200-day SMA (currently down at $4.82, still above net basis)

At the time of publication, Guilfoyle was long PLTR, SOFI, RKLB equity.