The 10 most overbought and oversold ASX 200 stocks – Week 26
As another week passes, lithium and iron ore stocks continue to dominate the list of oversold equities.
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The most oversold stocks on the ASX 200 continues to read like a graveyard of struggling lithium and iron ore stocks, burdened by heavy capex commitments and declining commodity prices.
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, Strike Energy is the most overbought stock on the ASX 200 with an RSI of 76.
Most Overbought ASX 200 Stocks
Ticker | Company Name | RSI | 1-Month % | Close | Target price | Upside |
|---|---|---|---|---|---|---|
Strike Energy | 76 | 33.3% | $0.28 | $0.29 | 3.6% | |
Insurance Australia Group | 75 | 15.0% | $7.14 | $6.44 | -9.8% | |
Pro Medicus | 75 | 23.6% | $143.26 | $107.49 | -25.0% | |
Steadfast Group | 74 | 13.2% | $6.18 | $6.59 | 6.6% | |
Altium | 74 | 1.9% | $68.03 | $62.56 | -8.0% | |
AGL Energy | 72 | 5.0% | $10.83 | $11.03 | 1.8% | |
Hub24 | 72 | 11.8% | $46.55 | $41.61 | -10.6% | |
Aristocrat Leisure | 71 | 14.3% | $49.76 | $50.28 | 1.0% | |
Light & Wonder Inc | 71 | 11.7% | $159.00 | na | na | |
Woolworths | 70 | 8.5% | $33.79 | $35.19 | 4.1% |
Target price' is an aggregate of broker target prices from Refinitiv. Data as of the close on Friday, 28 June 2024
Strike Energy rallied almost 25% last week after a series of announcements including:
South Erregulla reserves update
Application submission to the Australian Electricity Market Operator (AEMO) for the award of capacity credits and network access
Walyering-7 flow test update
The stock is currently down 12% on Monday, with Macquarie hosing down last week's outperformance and announcements.
"We've been surprised to see such a positive response to what was a larger South Erregulla reserve downgrade (65% to 45PJ) than what we think the market expected - suggesting there is excessive optimism around the timeline and value of the power project," the analysts said in a note on Monday.
An Underperform rating was maintained along with a 22 cent target price.
Most Oversold ASX 200 Stocks
Ticker | Company Name | RSI | 1-Month % | Close Price | Target price | Upside |
|---|---|---|---|---|---|---|
Mineral Resources | 18 | -26.8% | $53.92 | $69.86 | 29.6% | |
Megaport | 20 | -20.0% | $11.22 | $15.53 | 38.4% | |
Paladin Energy | 24 | -20.8% | $12.48 | $16.53 | 32.5% | |
Fortescue | 25 | -16.3% | $21.41 | $20.80 | -2.8% | |
Deterra Royalties | 26 | -14.4% | $3.99 | $4.69 | 17.5% | |
Liontown Resources | 27 | -33.2% | $0.91 | $1.35 | 49.2% | |
Arcadium Lithium | 28 | -26.6% | $4.93 | na | na | |
IGO | 28 | -22.7% | $5.64 | $7.71 | 36.7% | |
Pilbara Minerals | 29 | -20.9% | $3.07 | $3.60 | 17.3% | |
Lynas Rare Earths | 29 | -11.9% | $5.93 | $7.39 | 24.6% |
Target price' is an aggregate of broker target prices from Refinitiv. Data as of the close on Friday, 28 June 2024
Mineral Resources recently hit a concerning low, with its RSI dropping to 12 two weeks ago — a level not seen since the 2008 Global Financial Crisis. While the stock has shown some signs of recovery with a few positive sessions, bringing its RSI up to 18, it still ended last week down 3.3%.
The stock has been crushed by several factors including falling iron ore prices (down around 30% in the March quarter), downward spiraling lithium prices and a heavy capex outlook. You can read my full breakdown of how MinRes has historically performed after trading at extreme oversold levels here.
In summary, while short-term returns remain volatile, the probability of positive returns improves significantly over longer periods. However, Mineral Resources faces a unique challenge: This is the company's first time navigating an unprecedented capital expenditure cycle with elevated debt levels. Such financial burdens typically weigh on a stock's performance — until suddenly, they don't.
To analyse the forward returns from oversold conditions, we examined the first instance of RSI below 26 in each month, which yielded 16 data points | Source: Market Index
