These are the most overbought and oversold ASX 200 stocks – Week 47

The soaring S&P/ASX 200 Financial Sector has helped push several stocks like HMC Capital, Pinnacle Investment Management and Commonwealth Bank into overbought territory.

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

Key takeaways:

• The financial sector remains overbought but continues to find support from multiple tailwinds. These include stronger-than-anticipated trading updates, sustained equity market inflows, and higher yields – particularly beneficial for insurers like QBE.

• Technology One's recent performance highlights how overbought stocks can maintain their momentum. The stock rallied 10% on November 19 after reporting an impressive set of FY24 results, with profit before tax up 18% year-on-year, surpassing its own guidance of 12-16%. Strong cash flow and a healthy balance sheet position the company well for potential bolt-on acquisitions to drive ARR growth. The stock has shown remarkable resilience, gaining an additional 2.5% post-results despite the initial sharp rally.

Most Oversold ASX 200 Stocks

Key takeaways:

• Graincorp's recent trading pattern demonstrates how oversold stocks often struggle to find support. The stock experienced a 2.9% dip on 14 November after reporting its FY24 results. The result was largely ahead of analyst estimates, with EBITDA of $268m versus $266m expected (0.75% beat) and NPAT of $77m vs. Macquarie expectations of $66m (16% beat). The real pressure point came from FY25 guidance, where management cautioned about margin risks due to hesitant grower selling and abundant global grain supply. The stock's subsequent 5.1% decline the following day underscores this downward momentum.

• This pattern of sustained weakness in oversold stocks is also evident in names like Healius, IDP Education, and Endeavour Group. Endeavour Group, in particular, has been trending lower since late August, with management noting that increased discounting and sector-wide promotions have failed to boost sales. September proved especially challenging as consumer downtrading persisted.