The recent market sell-off has put an end to the winning streak that the S&P 500 had been enjoying for the past five weeks. The Nasdaq Composite and the Dow Jones Industrial Average are also both experiencing losses this week. On Friday, the Federal Reserve’s preferred inflation gauge was in line with expectations, but the overall market sentiment is cautious. Dow member Salesforce saw a significant drop of about 19% during the week, making it the most oversold stock in the market. This was a result of the company reporting a revenue miss and weak guidance on Wednesday.
As investors navigate through the market sell-off, it is crucial to identify opportunities for potential rebound. One way to do this is by looking at oversold stocks with a 14-day Relative Strength Index (RSI) below 30. An RSI below 30 suggests that shares may be due for a comeback. Salesforce, with a 14-day RSI of 16.4, falls into this category. Despite the recent drop in its stock price, many Wall Street analysts maintain a consensus buy rating on the company, emphasizing its artificial intelligence-related prospects. Goldman Sachs even referred to Salesforce as an “under-appreciated Gen-AI winner.”
Another oversold stock that investors may want to keep an eye on is biopharmaceutical company Bristol-Myers Squibb, which has an RSI of below 30 as well. The company has seen significant declines in its stock price, falling more than 2% week to date and about 20% in 2024. Despite this, analysts have a consensus hold rating on the stock, but predict that shares could rally more than 29% in the future. Bristol-Myers Squibb is undergoing a $1.5 billion cost-cutting initiative by 2025, aimed at improving its financial performance through various measures.
While oversold stocks present potential opportunities, it is also important to be cautious of overbought stocks that may experience a pullback. Tech company HP, for example, has surged 17.1% this week, making it the most overbought stock with an RSI close to 90. Despite reporting an earnings and revenue beat in its fiscal second quarter, analysts warn that the stock may not be able to sustain its rise, with a consensus analyst price target implying a more than 5% decrease from current levels.
In addition to HP, Ralph Lauren is another overbought name that rose almost 7% for the week. The apparel company has an RSI reading of 76.9, and analysts see more than 3% upside from current levels. However, investors should be mindful of the recent surge in the stock price and the potential for a correction in the near future.
The current market sell-off provides both challenges and opportunities for investors. By carefully analyzing oversold and overbought stocks, investors can position themselves to take advantage of potential rebounds or protect themselves from potential pullbacks. It is essential to conduct thorough research and consider the overall market conditions when making investment decisions during times of heightened volatility.
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