.svg)
Latest Business News
Market Analysis: Oversold and Overbought Stocks in the S&P 500
Overview of Market Performance
Despite a 38% slump this year, SolarEdge Technologies' shares are poised for a rebound, as indicated by a widely-used metric. The S&P 500 and the Nasdaq Composite concluded the week with a 0.3% and 1.9% decrease, respectively. This marked the second consecutive week of decline for both indexes as investors considered July's consumer and wholesale inflation data and multiple corporate earnings. The Nasdaq suffered due to a sell-off in semiconductor stocks, including Nvidia and Micron. However, the Dow Jones Industrials ended the week with a 0.6% increase.
Understanding Overbought and Oversold Stocks
Following these market movements, CNBC Pro utilized FactSet data to identify the most overbought and oversold stocks in the S&P 500. These were determined based on their 14-day Relative Strength Index (RSI). A stock with a 14-day RSI exceeding 70 is deemed overbought and could be due for a pullback. This high RSI often indicates excessive short-term optimism about a stock. On the other hand, an RSI below 30 typically signifies an oversold stock, which may be primed for at least a short-term bounce. A low RSI often represents a negative sentiment surrounding a stock.
The Most Oversold Stocks
SolarEdge, a manufacturer of solar panel equipment, is one of the most oversold companies in the S&P 500, with a 14-day RSI of just 9. The consensus price target suggests a 73.5% upside, with nearly two-thirds of Wall Street analysts rating the company a buy. Despite surpassing expectations for second-quarter earnings per share, SolarEdge's revenue fell short of analysts' estimates. Other oversold stocks include NextEra Energy, Moderna, GE Healthcare Technologies, Ameren Corporation, and Enphase Energy.
Spotlight on NextEra Energy and Moderna
NextEra Energy, a Florida-based electric utility, had the highest number of analyst buy ratings among the oversold stocks. With a 14-day RSI of 8 and 73.7% of analysts rating the stock a buy, the company's shares have declined by 17.6% this year. However, analysts expect a reversal of this trend, forecasting approximately 31% upside for the company.
Moderna, a vaccine manufacturer based in Cambridge, Massachusetts, is also oversold, with an RSI of 7.3. It has the highest expected upside on the list at 81.3%, and almost 35% of analysts rate Moderna a buy. Moderna shares have dropped 43.5% this year due to falling sales for its Covid vaccines. However, the company recently increased its full-year outlook for its vaccine, anticipating growing demand for its updated Covid vaccine targeting the dominant strain of the virus.
The Most Overbought Stocks
Marathon Petroleum is the most overbought stock in the broad-based index, with an RSI of 96.3. Over 68% of analysts rated Marathon a buy, with the average price target implying a 5.2% downside. Shares of the oil producer have increased by 28.7% this year, with 12.6% of those gains accumulating this month. Other overbought stocks include Amgen, Global Payments, Halliburton Company, Textron, and Jacobs Solutions.
Spotlight on Amgen and Global Payments
Biotech giant Amgen is another overbought name, with approximately a third of analysts rating the stock a buy. The stock, which has an RSI of 82, has remained unchanged on the year but has gained more than 12% in August.
Global Payments, a financial technology stock, is also overbought. With an RSI of 81 and almost two-thirds of analysts rating the company a buy, shares have surged 27.7% this year. This week's run was fueled by an upgrade from Jefferies to buy from hold.
Implications for New Businesses
The dynamics of the stock market, particularly the concept of overbought and oversold stocks, can have significant implications for new businesses. Understanding these market trends can help businesses make informed decisions about their investments and financial strategies.
Learning from Oversold Stocks
Companies like SolarEdge Technologies, NextEra Energy, and Moderna, which are currently considered oversold, present potential opportunities for rebound. For new businesses, these companies serve as examples of resilience in the face of market downturns. They demonstrate that with strategic planning and adaptability, it's possible to turn around a negative trend and create potential for significant growth.
Caution from Overbought Stocks
On the other hand, overbought stocks like Marathon Petroleum, Amgen, and Global Payments can serve as a cautionary tale. While their current performance might be strong, the high RSI indicates that a pullback may be imminent. New businesses should be wary of such trends and avoid over-optimism that could lead to financial pitfalls.
In conclusion, understanding the market dynamics of overbought and oversold stocks can help new businesses make strategic investment decisions. It's crucial to balance optimism with caution, and always stay informed about market trends to navigate the financial landscape effectively.
Article First Published at:
Brought to you by ChatGPT for
