One sure sign that stocks are getting overdone is the actions of overconfident investors that bid up stocks in a euphoric frenzy, only to dump them at the first sign of trouble. These behavior patterns normally usher in a corrective stage in the stock market, but exactly when that will occur is anyoneâs guess.
Investopiaâs definition of froth ârefers to a market condition where an assetâs price begins to increase beyond its intrinsic value.â Wall Streetâs âReefer Madnessâ event this week is just such an example.
Certain stocks in the cannabis sector saw their share prices double and then triple in a matter of days. Penny pot stocks with little to no fundamentals skyrocketed higher as well, notching up 50 percent gains or more each day.