## Overbought Energy Stocks: 3 Companies Flashing Red Flags for Momentum Investors
The energy sector is seeing some unusual activity, with three companies displaying a concerning trend for momentum investors. As of November 7, 2024, Select Water Solutions (WTTR), Propetro Holding (PUMP), and Natural Gas Services Group (NGS) all have Relative Strength Index (RSI) values above 70. This signifies that these stocks might be overbought and could be due for a correction.
The RSI is a widely used momentum indicator that compares a stock’s strength on up days to its strength on down days. It provides valuable insight into a stock’s potential short-term performance. A reading above 70 typically suggests a stock has been rising rapidly and is likely to experience a pullback, offering a cautionary signal to investors heavily reliant on momentum strategies.
Select Water Solutions Inc. (WTTR)
Select Water Solutions recently reported better-than-expected third-quarter revenue, contributing to a 29% surge in its stock price over the past five days. The company’s stock is currently trading at a 52-week high of $14.10, and its RSI value sits at a robust 84.39. While the company’s CEO John Schmitz highlighted continued margin improvement and strong free cash flow, the overbought RSI reading raises concerns about potential near-term volatility.
Propetro Holding Corp. (PUMP)
Propetro Holding, while experiencing a 14% gain in the past five days, saw its stock price close at $8.43 on Wednesday, a 16.3% increase. Despite achieving strong financial performance during the third quarter, Propetro reported a downbeat quarter, as articulated by CEO Sam Sledge. This, coupled with the RSI value at 71.32, warrants a closer look before considering further investment.
Natural Gas Services Group, Inc. (NGS)
Natural Gas Services Group, with its 19% price increase over the last five days, is poised to reveal its third-quarter financial results on November 15th. The company’s stock closed at $22.90 on Wednesday, representing a 12.8% increase. While the company’s performance remains to be seen, the current RSI value of 77.03 adds to the cautionary signals for momentum investors.
A Moment of Reflection
The RSI values of these energy stocks exceeding 70 underscore the importance of careful consideration for momentum investors. While each company may be experiencing positive developments, the overbought readings signal potential short-term risks. As always, conducting thorough research and understanding the individual company’s fundamentals is essential before making any investment decisions.