The most overbought and oversold ASX stocks – Week 19

This week, the focus is on the overbought side is companies driven higher by announcements versus those that are simply grinding higher. On the oversold side; what's going on with consumer-facing companies? And the ongoing slide in Woodside

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 Stocks

Data as of the close on Friday, 6 May 2024. Liquidity filter applied (stocks with a close price greater than $0.05, market capitalisation greater than $200 million, and average daily turnover last 21 days greater than $500,000.

The top 10 overbought list makes for some interesting reading this week.

Two names that stand out are Southern Cross Electrical Engineering (ASX: SXE) and Clarity Pharmaceuticals (ASX: CU6).

Both of these stocks have been talked about by fund managers on Livewire’s Buy Hold Sell recently, and both had been in solid uptrends before announcements really lit a fire under the share prices.

SXE announced it has been awarded a $160 million battery project, whilst CU6 received good news about one of its drugs. For the trend followers out there who were holding at the time of the announcement, the ensuing surge in both stocks makes for a handsome reward.

Amcor (ASX: AMC) is another stock that has rallied on an announcement but, unlike SXE and CU6, it was not trading near record highs prior to the announcement. The post announcement jump in AMC simply sees it trading back at levels seen in August/September last year.

Other names that stood out from the list were Supply Networks (ASX: SNL), Botanix (ASX: BOT) and Redox (ASX: RDX).

Why did they stand out?

Well, these stocks are overbought, but not due to an announcement that has seen the share price surge in the short term. Rather, these stocks have simply kept rallying, over an extended period of time. To be perfectly honest, their 6-month charts look like a trend trader's dream (not a recommendation 😊)

SNL six-month chart

BOT six-month chart

RDX six-month chart

Are SNL, BOT, and RDX overbought, or are their shares simply highly sought after?

Most Oversold ASX 200 Stocks

Data as of the close on Friday, 6 May 2024. Liquidity filter applied (stocks with a close price greater than $0.05, market capitalisation greater than $200 million, and average daily turnover last 21 days greater than $500,000.

As for the oversold cohort, what really stands out is the number of retailers/consumer-facing companies on the list.

Tourism Holdings Rentals (ASX: THL) and Air New Zealand (ASX: AIZ) are both in the tourism sector, Kogan.Com (ASX: KGN), Bapcor (ASX: BAP) and Woolworths Group (ASX: WOW) are pure retailers, and Select Harvests (ASX: SHV) and Collins Foods (ASX: CKF) are food producers.

But perhaps most interesting of all is the fact that Woodside Energy (ASX: WDS) is oversold. Oil prices climbed through April amid concerns over supplies and geopolitical risks, including wars in Ukraine and the Middle East. Analysts said at the time that momentum could carry prices higher.

And yet, WDS has been in terminal decline for the best part of a year, as the chart below shows. It will turn at some point; that is inevitable, but there is little technical evidence (other than being oversold) that it will happen imminently.

WDS 1-year chart

Is Woodside oversold, or is it just oversupplied?