As one of the more popular penny stocks on tap, Ideanomics (NASDAQ:IDEX) has certainly generated plenty of positive sessions. On a year-to-date basis, IDEX stock is up 30%, which is good, but not the most impressive figure considering the present euphoria. Nevertheless, it’s a lot better than what many speculative investments generated so far in 2021.
Of course, that’s not what is making news at the moment for the technology firm that specializes in electric vehicles (EVs). Over the past five days, IDEX stock has shed 5.5%. Over the trailing month, we’re looking at an alarming loss of 16.2%. Just for good measure, since its closing high of $5.43, IDEX hemorrhaged 52%.
It’s hard not to resort to Occam’s Razor for the interpretation of what’s going on with IDEX stock. Basically, investors have lost confidence in the EV narrative — and the fact that IDEX is a volatile penny stock doesn’t help.
Then again, you can look at the glass as half empty, such as our own Chris Lau. Recently, he suggested that IDEX stock appears “really compelling” as a bet on EV growth. Quoting Ideanomics CEO Alfred Poor, “Our presence in China over the last few years has created deep knowledge of the logistics and supply chain requirements for the manufacturer of EVs, batteries and related components.” Further, Lau wrote:
“Ideanomics appears to have more opportunities than the typical EV automotive company. For example, Energica is a 100% electric high-performance motorcycle; Solectrac is an EV targeting the underserved agriculture market. So, while EV cars and SUVs get crowded, Ideanomics is building a niche.”
And let’s not forget that social media is going crazy for penny stocks and publicly traded companies that are out of favor with mainstream analysts. So, it wouldn’t be wise to bet against IDEX stock. But it’s also not wise to bet on it.
It’s Time to Be Rational With IDEX Stock
First and foremost, we must be objective with the price chart of IDEX stock. Talk to me all you want about the fundamentals and the financials and various projections about the trajectory of EVs. That’s all fine and well — and the bulls could end up being justified in their optimism.
But what about now? Currently, IDEX stock is sandwiched between the 50-day moving average at top and the 200-day moving average at bottom. Furthermore, when you look at the chart, you can see that shares are straddling an increasingly tighter space between the market price and the longer-term moving average.
Yes, of course shares can swing higher from here. But the market is sending a clear message — it doesn’t like IDEX stock for whatever reason.
Second, the reason could be serious concerns about upside potential for the EV sector, whether in China or anywhere else. For instance, Nio (NYSE:NIO) is down 21% year-to-date. Over the trailing month, it’s down over 11%.
In addition, fundamental concerns exist that some investors may be ignoring. While Lau pointed out Soletrac’s climate-smart electric tractors as a potentially lucrative niche, it may also end up disappointing analysts.
Here’s the deal — you can fool investors with glitzy marketing campaigns, but you can’t cheat the science. Consistently, what keeps combustion-based vehicles relevant — even in this era of green everything — is energy density. Simply put, you can get so much more mileage or work done with a single gallon of gasoline or diesel than you can with an equivalent amount of electrons.
That’s why the agricultural niche may be more challenging than the retail EV market. For retail driving purposes, it’s easy to cover up EV charging downtime — cars today stay parked 95% of the time.
In agriculture? Downtime translates to lost productivity.
Look at the Bigger Picture
As you know, we live in a world of limited resources. If people collectively spend more money on one sector, then other sectors necessarily take a hit. Unless you’re a hedge fund specializing in naked short positions, you can’t spend more money than exists for a particular market.
Therefore, the extreme rise of cryptocurrencies is a huge problem for not only IDEX stock but also for other penny stocks. If people are spending their personal funds toward junk digital tokens, guess what? That just leaves less room for junk companies. Again, regular folks don’t have the capacity to spend more resources than what already exists.
So you may want to sit Ideanomics out for now. Neither the fundamentals nor the technicals (nor the craziness in the global markets) are conducive for IDEX stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.