4DMedical Ltd (ASX: 4DX) shares are being sold off again on Thursday as investors take another look at one of the ASX’s hottest stocks.
At the time of writing, the 4DMedical share price is down a sizeable 10.39% to $3.405.
That puts the stock down around 40% over the past month. It also leaves the share price more than 50% below its recent high of $7.37, which was reached on 14 April.
While the move is not being driven by any new announcements today, the sell-off appears tied to weaker momentum after a huge recent run.
Here’s what investors are looking at.
A huge rally is now unwinding
This pullback follows a massive run in the share price.
Even after the recent drop, 4DMedical shares are still up around 1,040% since this time last year.
The stock has been helped by a string of updates over the past 12 months. These include regulatory progress, commercial agreements, and stronger interest in the company’s lung imaging technology.
Its CT:VQ platform uses existing CT scans to create detailed maps of lung ventilation and blood flow. 4DMedical has previously highlighted US clearance, UK certification, and a commercial contract with GlaxoSmithKline as key steps.
That run helped send the share price to an all-time high in April.
Since then, investors appear to have been locking in gains as sentiment has cooled.
The stock has recorded several heavy down days, falling 5.47% yesterday and more than 20% over the past week.
The chart looks under pressure
The technical picture has also weakened.
The stock has broken well below its recent highs and is now trading near the bottom end of its recent range. The overall trend since mid-April has been lower, with each bounce struggling to hold.
The relative strength index (RSI) is sitting around 29, which puts the stock close to oversold territory. Meanwhile, the Bollinger Bands show the share price trading near the lower end of its recent range.
The lower band is sitting around $2.75, while the upper band is above $5.
From here, the first support area looks to be around $3.30, near the recent intraday low. If that breaks, the next level to watch could be closer to the lower Bollinger Band near $2.75.
Foolish takeaway
I can see why investors are taking some money off the table after such a big run.
4DMedical has clear commercial progress, but the stock had raced a long way ahead of current earnings.
Personally, I would not be chasing this sell-off today. I would want to see the share price settle first, especially around the $3.30 support area.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.