The 10 most overbought and oversold ASX 200 stocks – Week 43

Gold stocks experienced a remarkable surge before a recent setback. The S&P/ASX All Ordinaries Gold Index posted an impressive eight consecutive gaining sessions from October 9-21, pushing several major players like Regis Resources and Northern Star into Overbought territory.

In contrast, travel sector stocks continue to struggle, with Flight Centre and Web Travel Group's earnings downgrades weighing heavily on the sector. Even after entering oversold territory, these stocks have continued their downward trajectory, touching new year-to-date lows.

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, 25 October 2024

Gold Stocks Surge

The gold mining sector's performance has had an interesting journey in 2024. For most of the year, miners lagged behind physical gold prices by 5-15%, hampered by multiple challenges including operational difficulties, severe weather events, hedging positions, and escalating costs. However, a dramatic shift occurred between October 9-23, when the S&P/ASX 200 All Ordinaries Gold Index surged 16%, finally outpacing the underlying commodity.

Gold price (red) vs. S&P/ASX 200 All Ordinaries Gold Index (orange) | Source: TradingView

This rally came to an abrupt halt in the past three days, after Newmont (ASX: NEM) reported a concerning Q3 production report. The world's largest gold producer revealed Q3 2024 All-In Sustaining Costs (AISC) of US$1,611 per ounce – a 13% year-over-year increase and 11% ahead of analyst expectations. The news sparked a broad selloff in gold equities. After all, how can gold miners capitalise on rising gold prices if they can't control their operational costs?

Most Oversold ASX 200 Stocks

Data as at Friday, 25 October 2024

Travel Stocks Extend Losses

Web Travel Group and Flight Centre are on a painful skid and struggling to bounce despite experiencing one-day selloffs of more than 20%.

Flight Centre tumbled 20.4% on Thursday, 17 October after flagging that its year-to-date transaction volumes, margins and profits were only marginally ahead of the prior year. To add some perspective, UBS was expecting Flight Centre to deliver FY25 NPAT of $302 million or a 31% increase on the previous year. Since the selloff, Flight Centre shares have slipped a further 7.3%.

Likewise, Web Travel Group dipped 35% on 14 October after downgrading its revenue margin guidance to 6.5% from 7.0-7.5%. It was only six weeks ago that the company cut its margin outlook to 7.0-7.5% from 7.5%. Web shares continued to spiral lower after the one-day selloff, down a further 12% to levels not seen since November 2020.

It's important to remember that while oversold stocks may appear ripe for a rebound, they typically reach these conditions due to fundamental problems. These underlying issues often continue to exert downward pressure on the stock price or create an overhang that limit potential recovery.