(NEW YORK)–Electric Vehicle (EV) stocks have been on an epic run this past month, but has the sector gotten over extended in the near-term?
There is no doubt the EV stocks have been on a super run during the past month, and any traders who have been holding these plays it has been fun, fun, fun!
On Nov. 4th we issued alert that EV stocks could still have a run after election sell-off, but has that run now gone too far to fast?
The Relative Strength Index (RSI) on some of these stocks are flashing potential tops for possible sharp pullbacks in the short-term.
In general when the RSI on a stock or index reaches 30 or lower that is considered over sold, and usually great place to buy for possible bounce. On other side an RSI of 70 and higher indicates over bought, and can usually signal pullback in price near-term.
Well, some of these EV stocks are now trading with RSI’s of 80 to even 90, which indicates extremely over bought levels, and opens prospects for sharp violent pullbacks as RSI’s look to reset back below 70 before moving higher.
For example, Electrameccanica Vehicles (SOLO) is trading at an RSI of 82, and Ideanomics (IDEX) is trading with an RSI of 90, which is extremely over bought.
Other high RSI players are Workhorse (WKHS) at 70, Plug Power (PLUG) at 75, Nio (NIO) at 77, and Li Auto (LI) at 85.
Wait for Bubble Burst
Long-term does EV stocks make sense as an investment? Absolutely! The prospects of shift towards electric vehicles, and new Biden administration makes these stocks ones you want to own in your portfolio going forward. But, on same note, these stocks have made an epic run in November, and now may be time to take some profits off the table as the RSI on some these stocks indicate possible correction is forming as sector looks to let off steam and reset back to lower prices before making their next leg up.
In a world with Fed pumping liquidity trying to time when this bubble will pop may be hard for even most professional trader, but the RSI is usually one best indicators to signal when a stock or index has become over bought, and right now they are flashing caution at these levels.
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