The stock market experienced a turbulent week with major averages ending lower due to rising inflationary fears, Treasury yields, and subdued bank earnings. The S & P 500 and Dow Jones Industrial Average fell 1.6% and 2.4% respectively, marking their second consecutive week of declines. On the other hand, the Nasdaq Composite dipped 0.5% in its third consecutive weekly loss. This volatile market environment has created both challenges and opportunities for investors seeking to capitalize on potential rebounds in certain stock prices.
Using a stock screener tool, CNBC Pro identified the most overbought and oversold stocks on Wall Street based on their 14-day relative strength index (RSI) readings. Stocks with an RSI above 70 are considered overbought, indicating that a reversal may be imminent. Conversely, stocks with an RSI below 30 are deemed oversold, presenting a potential buying opportunity for investors.
Among the overbought stocks identified, Devon Energy stood out with an RSI of 82, indicating a potential downturn in its share price. Despite a strong year-to-date performance, an upgrade from Wells Fargo has boosted investor sentiment in the energy stock. Similarly, Exxon Mobil, with an RSI of 82 and reaching an all-time high, is also considered overbought. Barclays’ overweight rating supports the outlook for the energy sector, highlighting potential growth opportunities.
Undervalued Stocks
On the other end of the spectrum, stocks like Deere and Globe Life present different opportunities for investors. Deere, with an RSI of 79 and a buy rating from Truist Securities, offers a potential rebound with its strong fundamentals and technology-driven growth story. In contrast, Globe Life, with an RSI of just 3, is one of the most oversold stocks, having experienced a significant decline due to allegations of insurance fraud. Despite the negative sentiment, a price target reaffirmation by Truist Securities resulted in a bounce back in share price.
Overall, investor sentiment remains mixed as seen in the performance of stocks like Lamb Weston, which saw a sharp decline after missing earnings expectations. The company’s shares have tumbled significantly, reflecting bearish sentiment among investors. This highlights the importance of thorough research and analysis in identifying potential investment opportunities in both bullish and bearish market conditions.
The stock market’s recent volatility has created opportunities for investors to capitalize on potential rebounds or undervalued stocks. By carefully analyzing market trends and individual stock performances, investors can make informed decisions to navigate through uncertain market conditions. It is essential to remain vigilant and adaptive in response to changing market dynamics to optimize investment strategies and achieve long-term financial goals.