In the dynamic world of stock trading, momentum is often a key factor for investors. And when it comes to healthcare stocks, two companies, ImmunityBio Inc (IBRX) and Scholar Rock Holding Corp (SRRK), are sending out warning signs that might have investors re-evaluating their positions.
The culprit? Their Relative Strength Index (RSI), a popular momentum indicator that compares a stock’s upward strength to its downward strength. When the RSI surpasses 70, it generally signals that a stock is overbought, suggesting a potential correction could be on the horizon.
Let’s delve into the specifics of these two healthcare stocks:
ImmunityBio Inc (IBRX):
ImmunityBio recently announced the initiation of a Phase 1 clinical trial for its CAR-NK cell therapy, aimed at treating relapsed B-Cell Non-Hodgkin Lymphoma. This news propelled the stock upward, with a 20% surge over the past five days. While this positive development is certainly noteworthy, the company’s RSI currently stands at a hefty 76.65, indicating a potential overbought situation.
Scholar Rock Holding Corp (SRRK):
Scholar Rock, a company focused on developing therapies for chronic musculoskeletal diseases, made headlines earlier this month with the announcement of a $300 million public offering. This news led to a remarkable 237% surge in the stock price over the past month. While this news might signal investor optimism, the RSI is currently at 70.14, indicating a possible overbought territory.
What does this mean for investors?
While both companies have seen significant price gains, it’s essential to remember that overbought conditions can be temporary. Stocks that are considered overbought often experience a period of consolidation or correction before potentially continuing their upward trend.
Investors seeking to capitalize on momentum should carefully analyze these stocks, considering factors like the underlying business fundamentals, recent news events, and overall market conditions. As with any investment decision, conducting thorough research and due diligence is crucial before making any moves.