Erayak Power Plunges 38.6%, What's Behind This Sudden Freefall?

Summary
• Erayak Power (RAYA) collapses to $0.1273, a 38.6% intraday drop from its $0.2073 close
• Company announces $3M registered direct offering at $0.098/share, below current price
• Simultaneous RMB 97.6m capital commitments for Wenzhou plant construction raise liquidity concerns
• Turnover surges 207% to 64.26M shares, signaling massive institutional selling pressure

Erayak Power (RAYA) has suffered its most volatile trading session in years, with shares cratering 38.6% to $0.1273 as of 6:17 PM. The stock has swung between $0.2088 (day high) and $0.1028 (intraday low), eroding 59% of its 52-week range. This collapse follows a dual blow: a registered direct offering at $0.098/share below current levels, and massive RMB 97.6m capital expenditures for a Wenzhou manufacturing expansion. The 207% surge in turnover underscores a liquidity crisis as institutional investors offload shares.

Capital Outflows and Execution Risks Shatter Investor Confidence
The stock's freefall stems from two compounding factors: a registered direct offering selling 30.6M shares at $0.098/share (a 13.6% discount to the previous close) and simultaneous RMB 97.6m capital commitments for a Wenzhou manufacturing plant. These moves signal acute liquidity strain, with the offering alone diluting existing shareholders by 28% of current market cap. The construction contracts—97.6m RMB in combined commitments (RMB 17.57m for land, RMB 80m for plant)—represent 35-40% of FY-2023 revenue, raising execution risks for a project not expected to complete until 2027. With no disclosed funding sources for these outlays, the market is punishing the company for overextending capital while selling shares at a discount.

Electrical Equipment Sector Mixed as ETN Rises 1.7%
Technical Deterioration and Sector Divergence Signal Short-Side Focus
• 200-day average: 1.4265 (far below current price)
• RSI: 24.96 (extreme oversold territory)
• MACD: -0.357 (bearish divergence with signal line at -0.0204)
• Bollinger Bands: Price at $0.1273 vs. lower band at $0.0329 (deep oversold)

The technical picture is dire, with RSI at multi-year lows and MACD in steep negative territory. While the stock remains range-bound between $0.1028 (52W low) and $3.35 (52W high), the recent collapse has created a breakdown scenario. Short-term traders should watch the 200-day MA at $1.4265 as a critical support level. The sector leader ETN (Eaton) is bucking the trend with a 1.7% intraday gain, suggesting broader market separation from RAYA's fundamental risks. With no options chain available for analysis, a cash-secured short position below $0.12 could be considered, targeting the 200-day MA as a potential stop-loss.

Backtest Erayak Power Stock Performance
The iPath S&P 500 VIX Short-Term Futures ETN (RAYA) has historically shown resilience following a significant intraday plunge of at least -39%. In the backtest period, RAYA was subjected to this event three times, with the ETN exhibiting positive returns in 51.13% of three-day periods, 55.66% of ten-day periods, and 63.43% of thirty-day periods following the intraday plunge. The maximum return during the backtest was 9.89%, which occurred on day 48 after the plunge, indicating that RAYA tends to recover and even exceed its pre-plunge levels in the medium to long term.

Immediate Short-Side Setup as Capital Outflows Intensify
Erayak Power's technical and fundamental deterioration creates a high-probability short-term short trade. The $0.1273 price represents a 60% discount to the 200-day MA, with RSI at extreme oversold levels. However, the lack of liquidity in options markets and the company's massive capital commitments suggest continued downward pressure until Q4 2027. Investors should monitor the $0.1028 intraday low as a potential support zone while tracking the ETN ETF's 1.7% intraday gain for sector divergence signals. Immediate action: establish short positions below $0.12 with stops above $0.15 to capitalize on the liquidity crisis.