The recent market sell-off has put an end to the winning streak for the S & P 500, Nasdaq Composite, and Dow Jones Industrial Average. Despite the Federal Reserve’s preferred inflation gauge meeting expectations, all three major averages are on track for losses for the week. Dow member Salesforce experienced a significant drop of about 19% due to a revenue miss and weak guidance. This made it the most oversold stock in the market.
Identifying Overbought and Oversold Stocks
To capitalize on the sell-off, CNBC Pro screened for the most overbought and oversold stocks on Wall Street using the 14-day relative strength index (RSI). Stocks with an RSI below 30 are considered oversold, indicating a potential rebound, while an RSI above 70 suggests a stock may be overbought. Salesforce, with a 14-day RSI of 16.4 and a year-to-date decline of 13%, presents a potential opportunity for investors.
Despite Salesforce’s disappointing quarterly results, many analysts retain a positive outlook on the stock, citing its artificial intelligence-related prospects. With a consensus buy rating and a forecasted surge of more than 37% by analysts, Salesforce may be poised for a comeback.
Second-most Oversold Stock: Bristol-Meyers Squibb
Bristol-Meyers Squibb, the second-most oversold stock of the week, has seen a week-to-date decline of over 2% and a year-to-date drop of around 20%. Despite analysts’ consensus hold rating, the company’s cost-cutting initiative and potential rally of more than 29% offer a glimmer of hope for investors.
On the other hand, identifying overbought stocks such as HP, which surged 17.1% in a week with an RSI near 90, presents a different investment opportunity. While half of analysts rate HP as a strong buy or buy, the company may struggle to maintain its rise, with a consensus analyst price target indicating a potential fall of more than 5% from current levels.
Likewise, Ralph Lauren’s nearly 7% rise and RSI reading of 76.9 highlight its position as an overbought stock. Analysts foresee more than 3% upside potential, driven by the company’s fiscal fourth-quarter earnings beat and a 10% increase in dividend. With shares up nearly 14% in May and close to 30% in 2024, Ralph Lauren continues to attract investor attention.
The recent market sell-off presents both challenges and opportunities for investors. While oversold stocks like Salesforce and Bristol-Meyers Squibb offer potential rebounds, overbought stocks like HP and Ralph Lauren require careful consideration due to their recent surges. By understanding the market dynamics and analyzing individual stock performances, investors can navigate the current market conditions and make informed decisions to maximize their returns.
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