Rocket Companies price analysis as WSB strikes again

Written by: Michael Harris
March 3, 2021
  • Rocket is one of the most shorted stocks by hedge funds, with as much as 40% of its shares sold short
  • Rocket Companies stock price exploded more than 71% yesterday as WSB investors hit again
  • However, the price action has moved over 30% lower today on profit-taking

Shares of Rocket Companies (NYSE: RKT) plunged over 20% today after a sudden rally in a previous session as analysts urged caution in speculative trading.

Fundamental analysis: Analysts advise investors to jump ship

The company faced pressure after its stock price skyrocketed over 70% on Tuesday, its best-ever trading day. Rocket is one of the most shorted stocks by hedge funds, with as much as 40% of its shares sold short. As a result, Rocket drew Reddit investors’ attention. 

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Shortly after its rally, analysts warned investors about the speculative trading in Rocket shares. Investment banking giant JPMorgan urged its clients to jump ship following the sharp jump.

“In light of the sharp rise in share prices, we believe fundamental investors should take profits,” said Richard Shane, JPMorgan’s equity strategist. 

“While similar high velocity, high volatility events have created sustained speculative opportunities, we believe core, long-term investors will be able to rebuild positions at lower price levels.”

The bank holds an “Underweight” rating on Rocket, with a price target of $20.

Furthermore, RBC Capital Markets analyst Daniel Perman downgraded the stock to sector perform from outperform today, due to “abnormal volatility”. The analyst left the price target of $30 per share unchanged, translating to a drop of more than 27% for the stock.

It is hard to determine how much Reddit investors contributed to Rocket’s latest rally, however, it should be noted that the online mortgage provider has been among top posts on the r/WallStreetBets subreddit this week.

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Technical analysis: Volatile price action

Rocket Companies stock price exploded more than 71% yesterday after WSB investors targeted this stock that has previously attracted strong interest from short-selling hedge funds.

Rockit daily chart (TradingView)

However, the price action has moved over 30% lower today on profit-taking from WSB investors. We may see renewed buying interest around the $25 mark, a former horizontal resistance line. 

Summary

Shares of Rocket Companies are trading over 30% in the red today after shares of the online mortgage provider made a huge leap yesterday.