Ideanomics (IDEX) stock price is staring at a ~20% plunge

Ideanomics (NASDAQ: IDEX) stock price has bounced back as investors bought the company’s dip. The stock surged by over 50% on Tuesday and reached a high of $0.1171, the highest level since March 23rd. In all, the shares have jumped by over 400% from the year-to-date low.

Is IDEX a good EV stock?

Ideanomics is a company that is building electric vehicles in the United States. The company operates four subsidiaries that focus on various areas. VIA builds electric buses while Energica is an Italian company that builds electric motorcycles. 

Solectrack builds electric tractors while US Hybrid is an American firm that builds hybrid and electric propulsion kits. It also owns a company that sells EV bikes, scooters, and batteries in Malaysia.

Therefore, the company is tackling large industries that have a substantial market share. For example, Energica is disrupting the motorcycle industry that is valued at over $105 billion. The same is true with its other companies.

The challenge for Ideanomics is that the company is a cash incinerator. The most recent results showed that the company’s annual revenue came in at over $100.5 million while its net loss jumped to over $289 million. Its total net loss in the past ten years came in at over $845 million. 

The company, like other EVs, is facing capital problems as liquidity in the market dries. In its most recent results, the company said that it needs about $90 million for its Energica business and $100 million for its Via business. Therefore, as the IDEX stock price jumps, it also increases the possibility that the company will dilute its shareholders.

Ideanomics has a strong track record of dilution. The total outstanding shares jumped to over 512 million, higher than 2014’s low of 14 million. 

Ideanomics stock price forecast

I wrote about Ideanomics in May and warned that the shares could be delisted if it remains stubbornly below $1. The alternative is that the company will need to do a reverse split in the next few months. 

On the hourly chart, we see that the IDEX stock price has been in a strong bullish trend in the past few weeks. The shares have jumped above the key resistance point at $0.072, May 2nd high. The Average True Range (ATR) has soared, signaling that there is an elevated volatility. 

While the volume jumped on Tuesday, it has started moving downwards. Therefore, I suspect that the shares will retreat and retest the support at $0.072, ~20% below Tuesday’s close.

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