Stardust Power Plunges 20.1% Amid Sector Rotation

On June 17, 2025, Stardust Power experienced a significant drop of 20.1% in pre-market trading, sparking concerns and speculation among investors.

Technical analysis indicates that the Relative Strength Index (RSI) for Stardust Power triggered an oversold condition, suggesting extreme short-term weakness. However, this signal likely followed the sharp price drop rather than predicting it. Other technical patterns, such as head-and-shoulders or MACD/KDJ signals, did not trigger, indicating no clear reversal or continuation patterns.

The trading volume of 1.85 million shares, significantly higher than its 30-day average, suggests heavy selling pressure. This high volume could amplify price swings in a low-liquidity environment, making the stock highly sensitive to large trades. The lack of net inflow/outflow data leaves uncertainty, but the sheer volume implies retail panic selling or stop-loss orders being triggered.

Peer comparison shows divergent behavior among related theme stocks, hinting at sector rotation. Winners like BEEM, AXL, and BH.A outperformed, while losers like AREB and ALSN underperformed. This suggests investors are reallocating capital within the theme, favoring larger-cap stocks over smaller names like Stardust Power. The drop in Stardust Power may reflect a "sell-off the weak" dynamic as funds rotate to stronger performers.

The hypothesis for the drop includes technical overreaction and liquidity squeeze. The RSI oversold signal may have been a byproduct of the rapid decline, not a cause. High volume on low liquidity could have created a self-fulfilling price crash, as traders exited positions en masse. Additionally, sector rotation away from small-caps may have contributed to the drop, as capital flowed to larger, more stable names.

Historical backtests of similar small-cap stocks in oversold conditions with no fundamental news show that approximately 60% rebound within 3 days due to short-covering. However, if sector rotation continues, Stardust Power could remain pressured. Investors should monitor rebound attempts at the RSI oversold level and track whether peers like BH.A sustain their gains, which could signal broader sector trends.