The 10 most overbought and oversold ASX 200 stocks – Week 25

The most oversold list reads like a graveyard of heavyweight lithium miners, including Mineral Resources, IGO and Pilbara Minerals. This reflects the sharp decline in Chinese lithium carbonate prices, which hit year-to-date lows of 91,900 yuan per tonne 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, Pro Medicus is the most overbought stock on the ASX 200 with an RSI of 78.

Most Overbought ASX 200 Stocks

Target price' is an aggregate of broker target prices from Refinitiv. Data as of the close on Friday, 21 June 2024

Pro Medicus has rallied strongly since late February, when the stock sold off around 20% following weaker-than-expected half-year FY24 results. Citi reports that one of the company's main competitors, Sectra, recently released its FY24 results. These highlight that Pro Medicus continues to outpace its competition in revenue growth, margins, and transition to the cloud/SaaS model.

Despite the bullish read through, Citi analysts retained a sell rating and $80.00 target price due to valuation. They believe the current share price implies growth rates of at least 32% through to FY30, which "we view as unlikely".

Most Oversold ASX 200 Stocks

Target price' is an aggregate of broker target prices from Refinitiv. Data as of the close on Friday, 21 June 2024

Lithium stocks are in a world of pain as prices continue to unravel towards 90,000 yuan a tonne – a level not seen since August 2021, when Pilbara Minerals was trading at just 30 cents!

There's been plenty of analyst coverage of recent moves, with the latest from Wood Mackenzie suggesting prices could "remain under pressure between 2024-28".

Even Macquarie, a long-standing lithium bull, has recently turned bearish on the sector. For context, they maintained an Outperform rating on nearly every major lithium stock throughout 2023 and early 2024.

Last Friday, Macquarie significantly lowered its 2024-25 outlook for both spodumene (-24%/-35%) and lithium carbonate (-27%/-35%). This adjustment was attributed to short-term demand weakness and committed supply's inability to react. The analysts anticipate the market will begin to balance in 2026, with a meaningful improvement expected from 2027 onwards.

"The price declines in our lithium price deck have had a material impact on earnings and valuation for our coverage ... The major lithium miners (MIN, LTM, PLS, IGO) all have had their target prices reduced, with only LTM remaining on an Outperform recommendation given its floor contracts protecting it from the full force of price declines," the report said.