The 10 most overbought and oversold ASX 200 stocks – Week 36

The market's showing a lot of love for reporting season winners like Johns Lyng Group, Brambles and Hub24. These stocks rallied at least 10% post-earnings and seem relatively immune to recent market volatility, making them the most overbought stocks on the ASX 200 this 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, Johns Lyng Group is the most overbought stock with an RSI of 76.

Most Overbought Stocks

'Target price' is an aggregate of all broker target prices under Refinitiv's database. Data as at 8 September 2023 close. (Table: Market Index | Source: Refinitiv)

The reporting season winner playbook: There seem to be a pretty straightforward recipe for recent Overbought stocks.

• Step 1: Announce stronger-than-expected FY23 results and/or FY24 guidance

• Step 2: Stock rallies 5-15% on earnings

• Step 3: Most stocks grind 3-5% over the next couple of days and/or weeks

The stocks have all held up relatively well despite the ASX 200 falling around 2.2% in the last five sessions.

Johns Lyng Group 3-month chart (Source: Market Index)

Seven Group 3-month chart (Source: Market Index)

Brambles 3-month chart (Source: Market Index)

The Oversold stocks list continues to see some regulars including ResMed, Chalice Mining, Qantas, Coles, Alumina and Cromwell Property Group. As we noted in previously, a lot of stocks that end up with sub-30 RSIs tend to remain oversold for quite some time.

Most Oversold Stocks

'Target price' is an aggregate of all broker target prices under Refinitiv's database. Data as at 1 September 2023 close. (Table: Market Index | Source: Refinitiv)

A closer look at Orora: Orora shares fell 18% last week after raising $1.345bn at a 21.3% discount to its last close ($3.43 as at Friday, 25 August), a sizeable raise relative to its $2.3bn market cap. The proceeds will be used to acquire Saverglass, which management expects mid-single-digit EPS accretion within the first year.

"We think the deal is fair but view it as adding a third standalone asset rather than a complement to the existing operations," Morgan Stanley said in a note last week.

Orora 12-month price chart (Source: Market Index)