The 10 most overbought and oversold ASX 200 stocks – Week 41

Arcadium Lithium was the most overbought stock on the S&P/ASX 200 last week, with an RSI of 88, while The Star sits on the opposite end with an RSI of just 28.

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.

Most Overbought ASX 200 Stocks

Data as at Friday, 11 October close

M&A, Equity Market Inflows and Tech Runners

Arcadium Lithium soared into extreme overbought territory after it received a US$6.7 billion takeover offer from Rio Tinto. The US$5.85 (A$8.69) per share offer represents a substantial 108% premium to Arcadium's closing price on Friday, 4 October. Interestingly, Arcadium is currently trading at $8.20 or a 5.6% discount to the offer price. The deal is forecast to close in mid-2025, subject to regulatory approvals.

Wealth management platforms like Hub24 and Netwealth have performed strongly over the past twelve months amid equity market optimism, growing soft-landing expectations and Fed rate cuts. The latest update from Netwealth (10 Oct) highlighted:

• Record level of funds under administration inflows for the September quarter, up 93.5% year-on-year to $4.0 billion

• Total number of accounts up 2.7% for the September quarter

• Net inflows significant exceeded analyst expectations and boosted by favourable market conditions

• Inflows were driven by a diverse range of clients, including one notable institutional account and soaring markets further enhanced the company's FUA

Brokers including Citi and Morgan Stanley are bullish on Siteminder and expect revenue growth to accelerate to at least 30% per annum over the near term. Citi analysts reiterated a Buy rating with a $7.20 target on 29 September, citing:

• Revenue management solutions are gaining popularity among small and medium-sized hotels, as cloud-based offerings make these tools more accessible without requiring dedicated staff. This trend benefits SiteMinder's new Dynamic Revenue Plus (DR+) product

• Pricing for DR+ is uncertain, as SiteMinder plans to charge based on booking volume (around 1%) rather than the industry-standard per-room monthly subscription. This premium pricing reflects DR+'s combination of market insights, yield management, and channel management capabilities

• Citi views SiteMinder's 1% pricing target as optimistic, forecasting an average of 0.6%. They project DR+ could generate $30 million in revenue by FY27, assuming 5% adoption among SiteMinder's hotel customers.

Most Oversold ASX 200 Stocks

Data as at Friday, 11 October close

Struggling to Bounce, Earnings Downgrades

The Star remains the most oversold stock on the ASX 200 for a third consecutive week. It experienced a 44% one-day selloff on Friday, 27 September after resuming trade following a month-long suspension due to delayed full-year results. The market clearly has no confidence in the company's ability to address ongoing regulatory issue and financial challenges due to the stock's inability to bounce from extreme oversold levels.

Spark New Zealand has been in a persistent downtrend since February and during this time, tumbled around 40%. The weakness has been underpinned by several factors including:

• A significant debt burden of NZ$2.25 billion

• EBIT has halved in the last twelve months

• New Zealand economy entered a technical recession in the December quarter 2023. Spark has acknowledged tough economic conditions including cost of living pressures, lower consumer confidence and high inflation

• Spark began consulting staff in August about potential changes to its operating model, seeking bringing subsidiaries closer together, improving efficiency and lowering headcount

Overall, most of these stocks haven't suddenly become oversold. Rather, lingering catalysts have dampened their outlooks and suppressed any potential optimism. The nature of these catalyst vary widely, such as regulatory issues (e.g. IDP Education), changes in key contracts (e.g. Inghams selling less poultry to Woolworths) and disappointing earnings (e.g. Neuren's Q1 sales missed market expectations).