In the dynamic world of stock trading, momentum is a crucial factor. The Relative Strength Index (RSI), a popular momentum indicator, helps traders gauge a stock’s strength based on its recent price movements. When the RSI surpasses 70, it typically signals that an asset is overbought, implying a potential for a pullback or correction.
As of October 14th, 2024, two stocks in the information technology sector are flashing warning signs for momentum-driven investors: CompoSecure Inc (CMPO) and Coherent Corp (COHR).
CompoSecure Inc (CMPO)
CompoSecure, a company specializing in premium payment cards, announced impressive second-quarter results on August 7th. The company highlighted strong domestic growth and international demand, fueled by the launch of new programs, including the exclusive Amex White Gold Card and the first Wells Fargo and Expedia co-branded metal card. The company’s innovative Echo Mirror Card and LED card also contributed to their success.
CompoSecure’s stock has experienced a surge in recent weeks, gaining around 16% over the past month. The stock reached a 52-week high of $14.39. However, the RSI currently stands at 76.09, indicating potential overbought conditions.
On Friday, CompoSecure’s stock price rose by 3%, closing at $14.30. This further highlights the stock’s recent upward trajectory, but the RSI reading suggests caution for investors who value momentum as a key trading factor.
Coherent Corp (COHR)
Coherent, a leading supplier of lasers and photonics technologies, received a positive outlook from Needham analyst James Ricchiuti on October 14th. Ricchiuti maintained a “Buy” rating on the stock and raised the price target from $84 to $120. Furthermore, on October 11th, Coherent announced the appointment of Sherri Luther as CFO.
Coherent’s stock has experienced a remarkable surge, gaining approximately 39% over the past month. The stock reached a 52-week high of $104.67. However, the RSI currently sits at an elevated 85.47, indicating a high degree of overbought conditions.
On Friday, Coherent’s stock price climbed by 5.6%, closing at $104.62. While this signifies continued positive momentum, the high RSI value suggests potential for a correction in the near term.
While both CompoSecure and Coherent have demonstrated impressive performance, the elevated RSI readings signal caution for investors who prioritize momentum in their trading decisions. These stocks might be due for a period of consolidation or a pullback in the near future. Investors should carefully consider these factors and conduct thorough due diligence before making any investment decisions.