The 10 most overbought and oversold ASX 200 stocks – Week 50
Iress is in the midst of a turnaround and its shares are on an eight-day winning streak.
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Mentioned
KEY POINTS
- Iress is the most overbought ASX 200 stock for a second consecutive week
- Iress shares are up almost 40% in the last eight trading sessions
- Energy and lithium stocks remain the most oversold amid weakness in underlying commodity prices
Unexpected earnings upgrades can often trigger a surge in buying activity for stocks, as seen with Iress (ASX: IRE) – It's on an eight-day winning streak, up almost 40% to a near four-month high.
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, Iress is the most overbought stock on the ASX 200 with an RSI of 88.
The Most Overbought Stocks
Ticker | Company Name | RSI | 1-Month % | Close Price | Target price | Upside |
|---|---|---|---|---|---|---|
Iress | 88 | 46.9% | $8.14 | $8.80 | 8.1% | |
Perpetual | 83 | 22.0% | $25.70 | $25.83 | 0.5% | |
Magellan | 79 | 20.0% | $8.41 | $7.45 | -11.4% | |
Block Inc | 78 | 26.8% | $102.66 | na | na | |
Cochlear | 78 | 11.6% | $283.32 | $246.13 | -13.1% | |
Auckland International Airport | 76 | 6.7% | $7.68 | na | na | |
Seven Group | 76 | 14.2% | $33.09 | $32.11 | -3.0% | |
Pinnacle | 75 | 15.1% | $9.78 | $10.22 | 4.5% | |
Qube | 74 | 7.3% | $3.08 | $3.47 | 12.7% | |
Data#3 | 74 | 10.6% | $8.11 | $7.79 | -3.9% |
'Target price' is an aggregate of broker target prices from Refinitiv. Data of Friday, 8 December 2023 close.
Iress: Can the Gains Stick
It was just two months ago that Iress was down around 45% year-to-date and trading at levels not seen since April 2009.
This follows one of its largest one-day drops on record, down 35.5% on August 21 after announcing weaker-than-expected full-year results as well as a soft outlook and dividend suspension.
The comeback kicked off on November 30 after the company's strategy and guidance update, which noted:
Full-year adjusted EBITDA to be between $123-128 million vs. prior guidance of $118-122 million
Second half revenue growth of 2.6% on first half, slightly ahead of prior expectations and cost base to be more favourable due to lower staff costs
Net debt reduced from $375 million as at 30 June 2023 to $308 million at 31 October 2023
The update was well-received by brokers, with Macquarie reiterating an Outperform rating and $8.35 target price on November 30.
"Full-year adjusted EBITDA to be between $123-128 million vs. prior guidance of $118-122 million Second half revenue growth of 2.6% on first half, slightly ahead of prior expectations and cost base to be more favourable due to lower staff costs Net debt reduced from $375 million as at 30 June 2023 to $308 million at 31 October 2023," the analysts said.
Iress has V-shaped its way into overbought territory. Can the stock stage a calm and constructive pullback or will investors be looking to aggressively get out after such a troubled year? A good case study for the former is Inghams (ASX: ING) – It rallied for eight consecutive days back in August after reporting stronger-than-expected results. The pullback was shallow (no more than 6%).
Inghams announced a massive earnings upgrade on October 31 and rallied another ~17% in subsequent days. It's pullback was again shallow and its now back near recent highs.
Inghams daily chart (Source: TradingView)
The Most Oversold Stocks
The Oversold stocks list highlights broad-based weakness in energy as well as continued headwinds for lithium.
Large cap names like Woodside and Karoon Energy are both trading near 15-month lows following the recent slump in oil prices.
"In line with our Global Commodities Strategy Team, we lower our 2024e Brent oil forecast 6% to US$77/bbl, and US Henry Hub gas 23% to US $2.68/MMBtu," Macquarie analysts said in a note last Friday.
Ticker | Company Name | RSI | 1-Month % | Close Price | Target price | Upside |
|---|---|---|---|---|---|---|
Karoon Energy | 27 | -17.9% | $1.91 | $2.73 | 42.9% | |
Woodside | 28 | -9.0% | $29.81 | $33.33 | 11.8% | |
Tabcorp | 29 | -14.5% | $0.68 | $1.09 | 60.3% | |
New Hope Corp | 31 | -4.7% | $5.03 | $4.78 | -5.0% | |
Origin Energy | 33 | -11.6% | $7.84 | $9.13 | 16.5% | |
IPH | 36 | -6.9% | $6.50 | $9.96 | 53.2% | |
Liontown | 37 | -11.3% | $1.38 | $1.96 | 42.0% | |
Core Lithium | 37 | -32.1% | $0.27 | $0.39 | 47.2% | |
IGO | 38 | -11.7% | $8.18 | $11.17 | 36.6% | |
Domain | 38 | -3.2% | $3.38 | $3.63 | 7.4% |
'Target price' is an aggregate of broker target prices from Refinitiv. Data of Friday, 8 December 2023 close.
