Buy the RLX.US dip now?

RLX Technology Inc. $RLX Technology(RLX)$shares decreased to $8.82 from$9.40 in the previous sesion. The shares are down 3.6% in the past 5 days, and fell 27% in the past 30 days.

RLX sources its product from OEM/ODM manufacturers in China. Its forte is on the sales & marketing, especially its sales channels of more than 5,000 retail outlets across the mainland.

First, RLX faces the intrinsic risks from its own business structure and market positioning:

1. Increased regulatory risk from the Chinese regulators as 80% of RLX's business are in Mainland China

2. Highly dependent Smoore International $SMOORE INTL(06969)$, as more than 80% of its products were sourced from Smoore (due to Smoore's ceramic vaporing technology that dominates the e-cigarette market)

3. RLX also faces the latest lawsuits by IPO investors in the U.S., being accused of exaggerating the company growth forecasts and understating the potential regulatory risks

Second, its trading volume, option interest, and short selling interest all pointed toward short-term bearish signals.

1. High Option Volume - bearish

- Put option contracts traded totaled 20.7k or 3.0 times the average of past 20 days

2. High Option Open Interest - bearish

- Open interest in put options rose to 106.6k vs a 20 day average of 69.0k

- Ratio of put to call option open interest was 0.924 vs 0.636 for 20 day average, a difference of 12.3 standard deviations

Lastly, we should not forget that RLX IPO equity's 6-month lockup is expiring in 33 days, on Jul 21, 2021.