Alessio Rastani analyses the SpaceX stock chart following a significant post-IPO decline
Alessio Rastani reviews his earlier warnings about SpaceX and outlines what needs to happen before a bottom can be confirmed.
Summary
On the day of the SpaceX IPO, Rastani and fellow trader Manuel Bllye publicly cautioned that most tech IPOs underperform in their initial stages — and SpaceX has since dropped approximately 50% from its highs, a target level he identified weeks earlier based on historical IPO patterns. He now outlines the specific resistance levels SpaceX must break before any confirmed bottom can be declared, while noting that a positive divergence on the hourly chart suggests the downward momentum may be weakening.
Key Takeaways
FULL TRANSCRIPT
IPO Warning Revisited
Alessio Rastani: In this video, we'll have a look at the chart of SpaceX. I'm sure many of you watching have an interest in SpaceX, as do I. I've been closely watching the stock, and as some of you may remember, on the day that SpaceX launched — on the day of the IPO — we issued a major warning about SpaceX, which I'll mention again here. We'll explain what potentially could happen to SpaceX in the next several weeks and months, and what needs to happen before we can see a bottom on the stock.
So, as you may recall, on the day of the IPO, I was actually talking with my good friend and trader Manuel Bllye — some of you probably watched that video. But on that day, before the stock even officially launched, we made this major warning. Here's what we said:
"In the past, when we see tech IPOs come out, price typically tends to drop in the initial stages of a new tech IPO. My personal view is that I'm very cautious when a new technology IPO comes out — and the new one, for example, SpaceX."
"So no, I'm not going to buy SpaceX."
"So you're not one of these guys who, as soon as the IPO comes in the market, goes ahead and buys it. I think a lot of people do that."
"You shouldn't follow narratives. Sometimes a stock may come on the market — an IPO — and initially it may do well, but overall, over the next several months after the initial rally, they tend to drop and actually go below the levels of the initial price action. That is why I'm rather skeptical, and I'm going to do the same thing as you — I'm not just going to jump in."
So, as you heard, we were both saying: look, we're skeptical, we have to be cautious, because typically most tech IPOs underperform in their initial stages. And if you watch my member videos, you'll probably remember that in late June and also in early July, I made another warning about SpaceX — especially when it broke support. Here's what I said at that time:
"Usually, most tech IPOs tend to drop again in their initial stages — usually in the first three to six months — to about 50% of their highs following the IPO. We can see the highs at this level here, about 226. And as we know, if we divide 226 by two, that gives us this level here at approximately 112.82. That is a potential level that SpaceX could drop towards if support were to break. It's finally managed to break that important support region. By doing this, it has increased downside risk towards the lower support levels. As long as SpaceX remains below this resistance, downside risk has increased, and there's potential for a drop into the region between 141 to 134, and potentially even lower to the 124 to 123 region."
So, as you heard, in late June when SpaceX began to break the support level near 150 or 149, that was an initial warning that something was not quite right. By breaking that support, the price of most tech IPOs would typically drop down to 50% from their highs. And of course, as you heard in the video, if we take the highs on SpaceX — which occurred in June at about 225 to 226 — and divide by two, that gives us the important level highlighted on my chart: 112 or 113. I had another level above this at 123, which we also reached. But the bottom line is it has come down to the key support level I mentioned several weeks ago in June, based on the fact that most tech IPOs usually drop by about 50% from their highs.
Historical IPO Comparisons
Now, this is by no means a surprise. If you watched my previous video with Manuel Bllye, you'll remember I mentioned this particular chart — Rocket Lab. According to some experts, Rocket Lab is probably the closest comparable we have to SpaceX. And as you can see, after its initial IPO launch, it reached a high just above 18, then dropped down, took out the previous IPO price, fell below 10, went quite significantly lower, and then eventually the stock bottomed out and rallied.
Here's another one — Meta, or Facebook, when it launched. The IPO underperformed significantly in the initial stages, and then eventually bottomed out and recovered. There's also another example with BABA. When that IPO launched, again it didn't do well initially — you can see it dropped quite significantly — and then eventually bottomed out and rallied.
So as you can see, this is the reason why Manuel Bllye and I were quite skeptical and urging caution. We should always be extremely careful with tech IPOs because they usually don't do very well in their initial stages. Now, I think that eventually, once SpaceX bottoms out and recovers, it'll probably do well in the longer term. We cannot predict the future, but I think there is potential for SpaceX over the next five to ten years to do quite well. But in the short term, SpaceX has pretty much followed the same script — the same kind of pattern we see on tech IPOs. It has not done very well. It has dropped below its initial IPO price. It has dropped down to the 50% level as mentioned earlier, and at the moment it seems to be holding that level.
Current Chart Structure and Divergence Signal
Although I should add that at the moment there is still no bottoming structure — no sign of a bottom as yet. However, if we go on a lower time frame chart, on the hourly chart of SpaceX, we can see it's nicely forming a positive divergence. On the hourly time frame, we're seeing a lower low on the price, but the MACD is forming a slight higher low, which is a good sign. It's a positive sign that potentially the force of the downtrend or the drop is likely weakening.
Again, it does not necessarily mean that we're bottoming, because a positive divergence on its own is not enough to indicate a bottom. What we also need, in addition to a divergence, to confirm that a bottom is taking place is a break of resistance — key resistance. On SpaceX, one of the major resistance levels at the moment is about 137, and then above that, about 149.
Regression Channel and Key Resistance Levels
Now, on the daily chart, I'm going to put on a regression trend channel — drawn from the highs down to the near lows we have recently. The two standard deviation regression channel shows the upper part at nearly about 130, just under 137. So I would say that's the minimum level that SpaceX has to break if it wants to show us that it's bottoming. In other words, if SpaceX wants to prove that it's going to bottom, it has to at a minimum break that resistance at about 130 to 137. That's the minimum region of resistance it has to break before we see any indication of a bottoming structure.
I would also add, as I mentioned a few minutes ago, that it also has to break the prior lows that it formed, which are now resistance. As we know, support becomes resistance once it breaks. So that level that SpaceX broke some weeks ago — approximately 149 to 150 — is also another important resistance level. If SpaceX can break that level as well, that would further increase the probability that a likely bottom is forming. But as long as SpaceX remains below that resistance at approximately 150, there's still potential for more downside risk.
The 100 Level as Next Support
Looking at the lower part of that two standard deviation regression channel, it sits at nearly 100 — just under 100. In other words, if SpaceX sees a bounce and then drops again, if it continues to decline further, then that lower part of the regression channel and the 100 level are going to be important. The 100 level is a psychological support as well. Round numbers like these can be important. So we'll have to watch that level. If SpaceX bounces and then drops again, that's the level I'll be watching — nearly about 100.
I would be surprised if SpaceX went below 100 significantly. It is possible, of course, but I think there's potential for SpaceX to hold that level or at least hold above it. If SpaceX cannot hold 100, then there's even more potential downside risk. But we'll see.
Fibonacci Retracement Targets
I'll also draw the Fibonacci retracement tool from the highs down to these near lows. The 38.2% Fibonacci retracement is approximately at about 134. So there is potential for a temporary bounce, given the divergence we're seeing on the lower time frame. The positive divergence suggests there is potential here for a temporary bounce perhaps to that 38.2% Fibonacci retracement, which currently sits at about 134.
And if we get above that, there's potential into the zone between 134 and about 150. The golden ratio — the 61.8% Fibonacci retracement — is at about 148 to 149. That's why it's going to be an important level, because if SpaceX can break through that level in an impulsive pattern, that could be the first initial sign that a likely bottom is forming.
Summary of Levels to Watch
So there are two important resistance levels I'm watching on SpaceX. The first is the top of the regression channel combined with the 38.2% retracement — approximately 130 to 137. The second, above that, is the golden ratio retracement combined with the prior lows now acting as resistance — approximately 149 to 150.
Let's see if SpaceX can break through those levels in the next several weeks, which would be the first initial indication of a bottom. As I mentioned, at the moment there is no sign of a bottom. That means, despite any bounce we might get in the short term, we still have to remain a bit cautious. But overall, that's the chart picture I'm seeing on SpaceX. It still remains in a downtrend on this chart until and unless it breaks through resistance.