The IREN stock price has gone parabolic this year, moving from a low of $5.17 in April to $47 today. This surge has pushed its market capitalization from about $1 billion to over $12.7 billion. So, will the IREN share price keep rising as the short interest rises?
IREN stock price technical analysis
The daily timeframe chart shows that the IREN share price has been in a strong bull run this year. It jumped from a low of $5.17 in April to nearly $50 today.
Technical analysis shows that it has a bullish momentum, with the Average Directional Index soaring to 60. In most cases, an asset is said to have a strong trend when the indicator is above 20 and pointing upwards.
However, there is a risk that the stock may experience a significant reversal in the near term. One reason is that it has become highly overbought, with top indicators like the Relative Strength Index (RSI) and the Stochastic have surged to their extreme levels. In most cases, highly overbought assets tend to pull back.
At the same time, the stock remains substantially higher than the moving averages. The 50-day Exponential Moving Average is at 26, while the 100-day average is at $20. As a result, the standard deviation has jumped to 6.
Therefore, there is a risk that the stock will have a mean reversion, which is a situation where it returns to the historical averages after the standard deviation surges.
The crash will also happen as some investors who have benefited from the recent surge start to book profits.
There is a precedent to this. For example, CoreWeave stock price surged from a low of $32 in April to a high of $186 in June. It then plunged by 54% to $84 earlier this month.
Similarly, the Circle stock price initially soared after its IPO and then plunged by over 50% as some investors booked profits.
An IREN stock price crash would see it drop to the important support level at $30, the highest swing on September 3.
Why IREN share price has jumped
To be clear: this bearish forecast is not an attack of IREN’s fundamentals. Instead, it is based on technicals and historical context of what normally happens when stocks go parabolic.
IREN stock price has jumped because of its recent financial results, which showed that its growth trajectory was soaring.
The company’s revenue rose by 254% in the second quarter to $187 million, making it one of the fastest-growing companies in Wall Street.
Most of this growth came from its Bitcoin mining operations, which produced over $180 million as Bitcoin prices jumped and production soared.
The company is now betting big on artificial intelligence as it replicates the model championed by companies like CoreWeave and Nebius. Its AI cloud revenue rose to $7 million but the company expects it to start making billions soon.
The company has already bought over 4,200 Nvidia GPUs and is hoping to ramp this up to 60,000, which will be deployed in its British Columbia sites.
IREN seeks to capitalize on the ongoing demand for increased computing power. Just this week, Nvidia announced a $100 billion deal with OpenAI that will see them build more data centers in the US.
Microsoft recently entered a $17 billion deal with Nebius, while CoreWeave has a $12 billion deal with Nebius. As such, these developments mean that there is robust demand for its services. In a recent note, McKinsey said that AI data center investments will get to $7 trillion by 2030, a move that will benefit companies like IREN.
For investors, however, this means substantial dilution in the coming years as companies like IREN raise capital to invest in these data centers. This dilution fear explains why the short interest has jumped to over 10% this year.
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