Chart of the Day - Wednesday, February 19th, 2020

Today's Chart of the Day was shared on Twitter by Koyfin (@KoyfinCharts). The chart compares the year-to-date performance of Virgin Galactic ($SPCE), Tesla ($TSLA), and the S&P 500 ETF ($SPY). As of today's close, $SPCE and $TSLA are up a whopping 223% and 119%, respectively, while $SPY is up a modest 5%. This type of price behavior speaks to the type of risk-on environment that we're currently in. Legendary technical analyst, Bob Farrell once said, “Parabolic advances usually go further than you think, but they do not correct by going sideways.” In other words, the momentum from these rallies can carry the stock far higher than what anyone thinks is rational. However, once the momentum is gone, the subsequent correction tends to be sharp and violent as opposed to a sideways consolidation, where price corrects through time.