The 10 most overbought and oversold ASX 200 stocks – Week 33
Reporting season winners like Orora, JB Hi-Fi and AMP have rallied into overbought territory.
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Investors are flocking to companies with strong earnings, generous dividends, and promising outlooks, driving a slew of reporting season winners into overbought territory.
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.
Orora is currently the most overbought stock on the ASX 200 with an RSI of 81 while Neuren Pharmaceuticals sits at the opposite end with an RSI of just 21.
Most Overbought ASX 200 Stocks
Ticker | Company Name | RSI | 1-Month % | Close Price | Target price | Upside |
|---|---|---|---|---|---|---|
Orora | 81 | 23.5% | $2.52 | $2.59 | 2.8% | |
Technology One | 81 | 20.3% | $22.44 | $17.93 | -20.1% | |
AGL Energy | 79 | 13.4% | $11.77 | $11.03 | -6.29% | |
JB Hi-Fi | 75 | 19.0% | $77.39 | $58.63 | -24.2% | |
AMP | 74 | 15.2% | $1.33 | $1.14 | -14.0% | |
Magellan Financial | 72 | 9.4% | $10.73 | $8.94 | -16.7% | |
Zip Co | 72 | 22.7% | $2.19 | $1.32 | -39.7% | |
Inghams Group | 72 | 8.2% | $3.95 | $4.11 | 4.1% | |
NRW Holdings | 71 | 11.6% | $3.55 | $3.18 | -10.4% | |
Fletcher Building | 71 | 5.7% | $3.15 | $3.16 | 0.3% |
In the past 16 reporting seasons, companies that beat earnings expectations rise an average 5.2% and four months later, up an average 6.7%, according to Bell Potter's Richard Coppleson.
From an RSI perspective, this means that reporting season winners tend to soar into overbought territory and then stay there as the stock attracts broker upgrades, positive earnings revisions and sustained buying.
Case to the point, Orora has benefited from both a better-than-expected FY24 result as well as an unsolicited $2.25 billion takeover offer from US private equity firm Lone Star Fund. The FY24 result was bolstered by a strong second half, with key numbers including:
FY24 Group EBIT up 26% to $404m and 6% above consensus
FY24 Group NPAT up 10% to $224m and 10% above consensus
Group leverage at 2.78x and in-line with company guidance
"ORA's result surpassed low market expectations and its own guidance ... ORA again contained revenue declines through margin management initiatives and pro-active cost containment," Macquarie analysts said in a note last week.
Orora shares rallied 5.3% on the day of the result (14-Aug) and up another 4% since (15-19 Aug).
Most Oversold ASX 200 Stocks
Ticker | Company Name | RSI | 1-Month % | Close Price | Target price | Upside |
|---|---|---|---|---|---|---|
Neuren Pharmaceuticals | 21 | -25.1% | $15.57 | $28.56 | 83.4% | |
Lifestyle Communities | 28 | -24.4% | $8.35 | $15.68 | 87.8% | |
Fortescue | 30 | -21.3% | $17.34 | $20.90 | 20.53% | |
Mineral Resources | 30 | -17.8% | $45.91 | $69.86 | 52.2% | |
Nufarm | 30 | -13.0% | $4.02 | $5.44 | 35.3% | |
Origin Energy | 30 | -9.9% | $9.66 | $10.59 | 9.6% | |
Audinate Group | 31 | -37.3% | $9.45 | $19.77 | 109.2% | |
Cochlear | 32 | -8.4% | $305.56 | $287.76 | -5.8% | |
Liontown Resources | 34 | -20.2% | $0.79 | $1.35 | 70.9% | |
Stanmore Resources | 36 | -16.3% | $3.23 | $4.01 | 24.1% |
Iron ore prices plummeted almost 9% last week to levels not seen since 2022, hammering resource giants Fortescue and MinRes. The steel-making ingredient faces poor Chinese demand amid robust supply.
"Earlier this week, leading producer China Baowu Steel Group Corp. said the industry was facing a downturn more severe than major slumps seen in 2008 and 2015," Bloomberg reported.
The article also noted commentary from Marcus Garvey, head of commodities strategy at Macquarie: “The market is oversupplied when demand is falling cyclically, I would expect it’s not going to stop at marginal cost ... You probably would see prices at high US$80s, US$85, clearly taking out all the top portion of the cost curve.”
Iron ore majors have been oversold for quite some time, reaching fresh 52-week lows. However, it appears the sector may remain under pressure in the near term.
Singapore iron ore futures (Source: TradingView)
