The 10 most overbought and oversold ASX 200 stocks – Week 46

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. In this weekly series, we observe some of the market's most overbought and oversold stocks.

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 Monday, 18 October 2024

Key takeaways:

• Qantas has been on a tear and showing no signs of slowing. Citi recently raised their target price significantly from $6.60 to $8.20, citing favorable AGM trading updates. Key drivers include approximately $150m in fuel cost savings due to optimised capacity (lower ASKs).

• HMC Capital is another name that's soared into overbought territory, riding several tailwinds including the superior performance of alternative assets, growth in the Australian private credit market, soaring assets under management and high quality management fees/investment income.

• Aristocrat Leisure reported a strong FY24 performance (14-Nov), largely in-line with market expectations. The strategic sale of Plarium, while slightly dilutive to earnings, was broadly viewed as a positive shift, enabling the group to focus on premium gaming content and its growing interactive segment. The outlook for FY25 is optimistic, with anticipated growth in gaming driven by new product releases and market expansion. Analysts largely support the premium valuation, driven by sustained growth, strong cash flow, and product innovation across key segments

• Overall – while these stocks have reached technically overbought levels, they're supported by solid fundamentals, including earnings outperformance and positive industry trends. Despite steep price appreciation, momentum remains strong with no significant warning signs.

Most Oversold ASX 200 Stocks

Data as at Monday, 18 October 2024

Key takeaways:

• The S&P/ASX 200 Health Care Index experienced a five-day skid between 11-18 November, down 4% to a fresh 5-month low. The sector has struggled to perform in-line with the broader market, up just 3.8% year-to-date (vs. ASX 200 up 9.8%)

• Graincorp experienced a two-day selloff where the stock tumbled 8% after a mixed FY24 result. A key focus was the transformation program to shift its ERP system to SAP's S/4HANA platform. Analysts from UBS and CLSA viewed the transformation program as one that could pose potential risks due to high costs and scope uncertainty.