The 10 most overbought and oversold ASX 200 stocks – Week 35

Stocks that perform well during reporting season often continue their upward trajectory in the weeks and months that follow. While those that disappoint tend to extend their downward trend. This suggests that an overbought stock may push further into overbought territory, and vice versa.

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.

By this measure, Brambles is the most overbought stock on the ASX 200 with an RSI of 79 while Tabcorp sits at the opposite end with an RSI of just 20.

Most Overbought ASX 200 Stocks

Brambles, the world's largest manager of reusable pallets, crates, and containers, delivered one of the most intriguing results of the August reporting season. Despite its reputation as a defensive and predictable business, Brambles shocked the market with an exceptional performance.

Over the past decade (2013-2023), Brambles has demonstrated steady growth:

• Average annual share price gain: 9.8%

• Average annual dividend yield: 2.9%

• Average annual EBITDA growth: 5.4%

However, the company's recent results defied expectations, with key metrics including:

• Sales: Up 8% to US$6.54bn (in line with estimates)

• Operating profit after tax: Up 19% to US$778m (4.7% above estimates)

• Total FY24 dividend: 34 US cents (17% above estimates)

• FY25 underlying profit growth guidance: 8-11% (vs. 7.2% estimates)

The stock rallied 9.2% on results day (21 Aug) and another 5.3% the following day. This trifecta of beats across earnings, dividend, and guidance prompted widespread positive analyst revisions, with most target prices increasing by approximately 11.8% post-results. With no bearish catalysts in sight, Brambles continued its upward trajectory, reaching a fresh record high last Friday.

Most Oversold ASX 200 Stocks

In stark contrast, Tabcorp's FY24 results paint a different picture:

• Shares plummeted to levels not seen since August 2020

• FY24 EBITDA reported at $318 million, 3% below consensus

• Operating costs exceeded the high-end of guidance

A Macquarie analyst noted, "Tabcorp is in a tough spot with wagering volumes seeing ongoing regulatory impacts, against a ballooning cost base." Consequently, they halved their target price to 50 cents per share while maintaining a Neutral rating.

The market reaction was severe, with the stock down 15% on results day and a further 9% since the announcement.