The 10 most overbought and oversold ASX 200 stocks – Week 31

Gold miners are printing some serious cash as prices for the underlying commodity continue to hover around record highs of US$2,400 an ounce. Bullion's strength has helped propel Newmont shares to a one-year high and the most overbought levels since its ASX debut on 27 October 2023.

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.

Newmont currently tops the list as the most overbought stock with an RSI of 77. While Domino's Pizza sits at the opposite end of the spectrum as the most oversold stock, with an RSI of 24.

Most Overbought ASX 200 Stocks

Newmont reported an operationally strong June quarter result last week, where solid gold production and better-than-expected earnings was slightly offset by a higher cost outlook. Some of the key Q2 highlights include:

• Gold output: 1.61 million ounces or 1% below consensus

• AISC: US$1,562 an ounce or 6% above consensus (Newmont previously guided to 2024 AISC of US$1,400 an ounce)

• Earnings per share: 72 US cents vs. 61 US cents consensus or an 18% beat

• Free cash flow: US$634 million vs. US$363 million consensus or a 75% beat

• Completed $205 million in share repurchases and repaid US$250 million in debt

To add some perspective, Newmont reported just EPS of 33 US cents per share for the same period a year ago. It goes to show the amount of leverage gold miners have to higher prices, especially as they move through periods of heavy capex.

"Newmont had a good second quarter with most operational and financial metrics ahead of our expectations. Newmont appears to have strengthened its expectations for the upcoming asset sale proceeds, and this confidence is a key driver in the early commencement of the buyback," Macquarie analysts said in a note dated 26 July.

The report retained an Outperform rating for the stock and raised its target price by 5% to $85.00.

Most Oversold ASX 200 Stocks

Several stocks have plummeted to oversold levels in the aftermath of significant earnings and outlook downgrades. A few names that stand out include:

Domino's Pizza: The stock dropped 8.2% on 18-Jul following a downgrade in its FY25 store growth outlook. This was prompted by the closure of 80 underperforming stores in Japan and 20-30 in France. Macquarie analysts noted last month, "The issues in France and Japan remain a key headwind for Domino's over the near term, with the turnaround of these markets likely to take a couple of years. Network growth will likely remain muted over the medium term as management focuses on store profitability."

Lifestyle Communities has been in a massive downward spiral. On 15 July, the stock dipped 18% after an ABC report highlighted homeowner dissatisfaction with the company's communities at Wollert in northwest Melbourne, leading to applications filed with the Victorian Civil and Administrative Tribunal. Subsequently, the company withdrew all forward-looking guidance, citing difficulties in quantifying the impact of recent media coverage on future sales and settlements.

Other Notable Declines:

• Boss Energy: Affected by a major director selldown a few months ago.

• Fortescue: Struggling due to its pivot away from green hydrogen and selldowns from major investors

• Bellevue Gold: Impacted by an unexpected $150 million capital raise.

• South32: Challenged by its FY25 production downgrade.