The 10 most overbought and oversold ASX 200 stocks – Week 18

Gold miners, takeover candidates and quarterly reporting season winners have topped the overbought list while media and real estate stocks continue to trade in oversold territory last week.

The 14-day Relative Strength Index is a momentum indicator that measures the magnitude and speed of recent price changes to assess whether or not a stock is overbought or oversold.

An RSI of 70 or above is considered to be overbought, which means the stock is rising too quickly and likely to experience a pullback. Meanwhile, an RSI of 30 or below is considered to be oversold, which means the stock is falling too quickly and is likely to experience a rebound.

Based on this indicator, CSR (set to be acquired by France's Saint-Gobain at $9.00 cash per share) remains the most overbought stock on the ASX 200 with an RSI of 76.

Most Overbought ASX 200 Stocks

'Target price' is an aggregate of broker target prices from Refinitiv. Data as of the close on Friday, 26 April 2024

Telix Pharmaceuticals demonstrates the impact a robust earnings update can have on a stock. Its March quarter report noted:

• Revenue up 18% to US$111.8 million

• Reaffirmed FY24 revenue guidance between US$445-465 million or growth of approximately 35-40% year-on-year

• R&D investment is expected to increase 40-50% for FY24

Post-earnings, Jefferies reiterated a Buy rating with a $15.30 target price (up from $15.00). The analysts also upgraded their FY24-25 revenue estimates by 4% and 6% respectively as well as FY24-25 earnings estimates both by 15%.

The stock finished the results session (Thursday, 18 April) 9.4% higher and up another 8.7% over the next five sessions.

Telix Pharmaceuticals 12-month price chart (Source: Market Index)

Most Overbought ASX 200 Stocks

Yield-sensitive sectors like real estate have pulled back sharply on hot inflation data and soaring bond yields. According to Morgan Stanley, Charter Hall (ASX: CHC) and Dexus (ASX: DXS) are amongst the ASX 100 REITs with the strongest and most consistent negative correlation to bond yields.

'Target price' is an aggregate of broker target prices from Refinitiv. Data as of the close on Friday, 26 April 2024

Lifestyle Communities unexpectedly downgraded its FY24 guidance to 290-310 new home settlements, which at the midpoint is 15% lower than its prior guidance of around 35. The stock finished the session (Tuesday, 23 April) down 13.5% to levels not seen since June 2022.

"We believe the 2nd downgrade in 2 months could leave investors nervous on Lifestyle Communities, with some potentially questioning the near and medium term volume targets and the growth outlook," Citi analysts said in a note dated 23 April.

"Our view has been that the balance sheet is in a much better position after the equity raising and there is strong medium term growth in the land lease market and LIC should be attractive given direct exposure to this." Citi retained a Buy rating but cut its target price to $17.90 (from $20.00).

The problem with a significant and unexpected downgrade is that the stock tends to experience lingering selling pressure for days, if not weeks. By the end of this period, the stock often finds itself entrenched in oversold territory and unable to catch a bid. Lifestyle Communities is currently down around 2.2% since the announcement.

Lifestyle Communities 12-month price chart (Source: Market Index)