As of Sept. 20, 2024, two stocks in the energy sector are sending out a potential warning signal to investors who heavily rely on momentum in their trading strategies. Brooge Energy (BROG) and Battalion Oil (BATL) are showing high Relative Strength Index (RSI) values, indicating they might be overbought.
The RSI is a widely used momentum indicator. It compares a stock’s strength during upward price movements to its strength during downward movements. When compared to a stock’s price action, the RSI can give traders a better understanding of how a stock might perform in the short term. Generally, an asset is considered overbought when its RSI surpasses the 70 mark.
Brooge Energy Ltd (BROG):
Brooge Energy received a non-compliance letter from Nasdaq on June 5. Despite this, the company’s stock has seen a remarkable surge, gaining approximately 82% over the past month. The stock hit a 52-week high of $6.66. However, on Thursday, Sept. 19, BROG shares closed at $1.77, representing a 14.9% gain. Its current RSI stands at 83.55, indicating an overbought condition.
Battalion Oil Corp (BATL):
Battalion Oil announced on Sept. 19 that it has amended its merger agreement with Fury Resources. This agreement involves Fury acquiring all outstanding Battalion shares at $7.00 per share in cash. Avi Mirman, Co-Founder and Chairman of Fury Resources, highlighted the strategic value of the acquisition, stating, “With this acquisition, Fury has secured a foothold in one of the world’s most prolific basins. Our team has significant experience in the region, and we believe these assets present a compelling value proposition for our investors. With a deep inventory of high return locations and consolidation opportunities in the area, we believe this asset can be scaled quickly and provide a meaningful return to our investors. We have strong institutional support for this transaction, including the Rollover Stockholders. We view their decision to stay in the investment opportunity as a strong vote of confidence in our ability to deliver results and are excited for us to get to work.” Battalion’s stock has gained around 17% over the past month, reaching a 52-week high of $9.69. However, on Thursday, shares closed at $2.94, a 3.6% decline. The stock currently boasts an RSI of 83.48, suggesting overbought conditions.
While these stocks have seen significant price gains, their high RSI values might be a signal that a short-term correction could be on the horizon. Investors who prioritize momentum strategies should be aware of this potential risk and consider adjusting their positions accordingly.
