As of September 5, 2024, two energy stocks are flashing warning signs for investors who prioritize momentum in their trading strategies. YPF SA (YPF) and Comstock Inc (LODE) have both crossed the overbought threshold on the Relative Strength Index (RSI), a widely used momentum indicator.
The RSI measures a stock’s strength during periods of price gains compared to its strength during periods of price losses. A reading above 70 typically suggests an asset is overbought, potentially indicating a short-term pullback.
YPF SA (YPF)
YPF, an Argentine oil and gas company, saw its stock surge approximately 33% in the past month, reaching a 52-week high of $24.76. This strong performance propelled the stock’s RSI to 71.34, pushing it into overbought territory. YPF has recently announced cash tender offers for its securities, aiming to acquire up to $500 million. This move, while positive, could be contributing to the overbought condition. On Wednesday, YPF shares gained another 3.4%, closing at $24.04.
Comstock Inc (LODE)
Comstock, a company involved in real estate and energy, has experienced even more dramatic gains, rising around 133% in the past month. The company’s stock reached a 52-week high of $0.63, pushing its RSI to 81.24, a significantly overbought level. It’s worth noting that Comstock recently reported disappointing quarterly results, missing both revenue and earnings estimates. Despite this, the stock surged 18.7% on Wednesday, closing at $0.33.
Investors who prioritize momentum as a key trading strategy should be aware of the overbought signals from YPF and Comstock. While the companies may continue their upward trends, the RSI suggests caution and the potential for a short-term correction. This potential correction could provide a better entry point for investors interested in these stocks.
