Rocket Lab's RKLB Plunges 7%: What's Behind the Sudden Drop?

Summary
• Rocket Lab (RKLB) tumbles 6.99% intraday to $71.78, nearing its 52-week low of $14.71
• Analysts maintain a 'Buy' rating but project a 26% downside to $53.23
• Benjamin Graham's analysis flags structural weaknesses in sales/earnings growth
• High-leverage put options (e.g., RKLB20260102P64) emerge as key bearish plays amid divergent market sentiment and sector-specific volatility

Rocket Lab’s sharp intraday decline has ignited a frenzy of speculation, with the stock trading near its 52-week low despite analysts maintaining a 'Buy' rating. The move defies recent sector optimism and analyst bullishness, raising urgent questions about valuation sustainability and market sentiment shifts.

Contract Win Sparks Profit-Taking and Profit-Taking Pressure
The stock’s collapse stems from conflicting signals between fundamental analysis and analyst projections. Benjamin Graham’s Value Investor model flags RKLB’s failure in sales growth (FAIL) and long-term EPS growth (FAIL), despite its 78% RSI suggesting overbought conditions. This divergence creates a toxic mix: while analysts project a $53.23 price target, the Graham analysis underscores structural weaknesses in revenue generation and earnings momentum. The recent $816M defense contract win appears to have triggered profit-taking, with traders capitalizing on the 118% YTD rally before fundamentals catch up to the price action.

Aerospace & Defense Sector Mixed as Rocket Lab Diverges from LMT's Steady Performance
While the Aerospace & Defense sector remains elevated on defense spending optimism, Rocket Lab’s performance starkly contrasts with sector leader Lockheed Martin (LMT), which trades down 0.53%. The sector’s recent gains from Trump’s executive order and SpaceX IPO speculation have not translated to RKLB, which faces unique valuation pressures. LMT’s stable -199 P/E ratio versus RKLB’s -199.23 P/E highlights differing market perceptions of growth sustainability in the space industry.

Bearish Options Playbook: Capitalizing on RKLB’s Volatility with High-Leverage Contracts
• MACD: 6.38 (above signal line 3.40), RSI: 78.68 (overbought), Bollinger Bands: $80.32 (upper), $56.21 (middle), $32.11 (lower)
• 200-day MA: $40.36 (far below current price), Support/Resistance: $41.76–$42.53 (30D), $46.96–$48.18 (200D)
• Turnover Rate: 2.59% (healthy liquidity), Dynamic P/E: -199.23 (negative earnings)
• Key Levels: Watch $70.89 (intraday low) and $56.21 (Bollinger middle band) for directional clues
• Sector Correlation: Divergence from LMT’s -0.53% suggests RKLB’s move is stock-specific
• Options Liquidity: 239,500 shares traded in RKLB20260102C60 (strike $60) and 66,173 in RKLB20260102P64 (strike $64)

Top Options Contracts:
1. RKLB20260102P64 (Put):
• Strike: $64, Expiry: 2026-01-02, IV: 75.38% (high volatility premium), Leverage: 136.28% (magnifies downside potential), Delta: -0.1255 (moderate sensitivity to price moves), Theta: -0.0542 (rapid time decay favors short-term bearish bets), Gamma: 0.0256 (responsive to price swings), Turnover: 66,173
• This put contract offers asymmetric upside in a 5% downside scenario (ST = $68.64): Payoff = max(0, $64 - $68.64) = $0. However, the 75% IV and 136% leverage create a volatility buffer. Ideal for aggressive short-term bearish positioning.
2. RKLB20260102P65 (Put):
• Strike: $65, Expiry: 2026-01-02, IV: 74.52% (robust volatility), Leverage: 111.12% (high reward-to-risk ratio), Delta: -0.1540 (stronger downside sensitivity), Theta: -0.0569 (aggressive time decay), Gamma: 0.0298 (enhanced responsiveness to price acceleration), Turnover: 41,870
• This contract provides a 5% downside payoff of $1.36 (max(0, $65 - $68.64)). The 74% IV and 111% leverage create a compelling risk-reward profile for traders expecting a breakdown below $70.89.

Trading Outlook: With RSI at 78.68 and MACD above the signal line, the stock is technically overbought but structurally weak. The 200-day MA at $40.36 suggests a long-term bearish bias, but near-term volatility offers options-driven opportunities. Aggressive bears should prioritize RKLB20260102P64 for its high leverage and liquidity, while RKLB20260102P65 offers a slightly safer entry with comparable reward.

Backtest Rocket Lab Stock Performance
The backtest of Rockwell Automation (RKLB) after a -7% intraday plunge from 2022 to the present shows favorable performance metrics. The 3-Day win rate is 55.99%, the 10-Day win rate is 52.48%, and the 30-Day win rate is 57.64%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest was 16.78%, which occurred on day 59, suggesting that RKLB has the potential for significant gains following a substantial pullback.

RKLB at Crossroads: Watch $70.89 Support and LMT's Resilience for Clarity
Rocket Lab’s 6.99% intraday drop has created a critical inflection point, with technical indicators and fundamental analysis pointing to divergent outcomes. The stock’s proximity to its 52-week low and Benjamin Graham’s red flags suggest caution, but the sector’s optimism and analyst buy ratings leave room for a rebound. Immediate focus should be on the $70.89 intraday low as a support level and the performance of sector leader Lockheed Martin (-0.85% price change) for broader industry clues. For traders, the RKLB20260102P64 put offers a high-leverage, high-liquidity play on a potential breakdown, while longer-term investors should monitor earnings momentum and contract execution. Action Alert: Position short-term puts if $70.89 breaks, and watch LMT’s resilience for sector-wide signals.