Tesla, the electric vehicle maker, was identified as the most overbought stock this week based on the “relative strength index” (RSI), a commonly used metric, which showed investors piling into the company. The RSI enables investors to measure the speed and magnitude of recent price changes, which can indicate potential overbought or oversold conditions in the market. If a stock has an RSI of more than 70 for 14 days, it is considered overbought, and traders are recommended to reduce exposure. In contrast, if a stock has an RSI of less than 30 for 14 days, it is considered oversold, indicating that sentiment may be too poor for the name, and it may be time to buy. Based on this gauge, Tesla had an RSI of 91.46, with the longest winning streak of 11 days. The electric vehicle maker rallied by 4% on Friday after CEO Elon Musk and GM CEO Mary Barra announced a partnership that gives GM access to Tesla’s charging stations in North America. However, analysts polled by FactSet expect the stock to fall 17% from here, and only 40% have a buy rating on the name.
Other Overbought Stocks This Week
Apart from Tesla, other overbought stocks identified this week include Adobe, with an RSI of 80.88. Wells Fargo upgraded the software stock to overweight from equal weight on Friday and raised its price target to $525 from $420, expecting Adobe to be an AI beneficiary. However, only 41% of analysts consider Adobe a buying opportunity, and the stock is expected to fall by approximately 0.8%, according to consensus estimates from FactSet. Enphase Energy and Match Group were also identified as overbought stocks this week.
Most Oversold Stocks This Week
On the other hand, Target was among the most oversold stocks this week, with a 14-day RSI score of 13.85. The retail stock slid more than 4% this week, and Citi downgraded Target to neutral from buy on Friday, cutting its price target to $130 from $177. The firm expects sales to have peaked at the big-box retailer. Only 42% of analysts have a buy rating on Target, but they expect shares to jump by more than 30%, according to consensus estimates on FactSet. Ulta was also oversold this week, with a 14-day RSI of 17.93. Only about 46% of analysts recommend buying the stock, but they expect the beauty retail stock to have about 28% upside from here. UBS said the stock is one of its top ideas, despite the sell-off after its most recent quarterly results, and the risk-reward is “firmly tilted to the upside.” Other oversold stocks this week include Advance Auto Parts and AutoZone.
Investor Sentiment
The RSI is a widely used tool to measure investor sentiment in the stock market. The gauge provides investors with a clear view of the recent price changes and potential overbought or oversold conditions in the market. A high RSI indicates that a stock is overbought, while a low RSI indicates that a stock is oversold. Investors use this information to decide whether to buy or sell a stock. In the case of Tesla, the RSI showed that investors piled into the stock, making it the most overbought stock this week. However, analysts polled by FactSet expect the stock to fall by 17%, indicating that investors may soon need to divest their holdings. Similarly, Target was identified as one of the most oversold stocks this week, with a low RSI score of 13.85, suggesting that sentiment may have gotten too poor around the name.
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