After a turbulent week with concerns about interest rates and global market volatility, the stock market managed to recover slightly on Friday. Despite the bounce back, there are still some opportunities for stocks to either rebound or experience a sharp pullback.
One way to gauge the potential direction of a stock is by looking at its 14-day relative strength index (RSI). Stocks with an RSI above 70 are considered overbought and may be at risk of a pullback. For example, Disney currently has an RSI of 27.7, indicating that the stock may be due for a bounce higher. Despite beating Wall Street’s third-quarter estimates, Disney experienced a decline in its theme parks business due to a pullback in consumer demand.
On the other hand, stocks with an RSI below 30 are considered oversold and may present a buying opportunity. Take-Two Interactive Software, with an RSI of nearly 28, falls into this category. The video game maker recently reiterated its full-year forecast and saw a 4% increase in its stock price. Super Micro Computer and Ulta Beauty are also among the oversold stocks, signaling a potential for gains in the future.
Conversely, there are stocks that have surged to high levels and may be due for some losses ahead. Kellanova, with an RSI of 87.2, saw a 19% increase in its stock price after reports of a potential takeover. Axon Enterprise, maker of the Taser, experienced a significant jump in its stock price after beating second-quarter earnings and revenue expectations. Furthermore, Lockheed Martin and Northrop Grumman, both with high RSIs, are also in the overbought category.
Despite the fluctuations in the market, analysts remain bullish on certain stocks, including Axon Enterprise which received a consensus rating of buy. Additionally, Lockheed Martin received an upgrade to outperform from RBC, indicating positive sentiment towards the stock.
As investors navigate through the ups and downs of the stock market, it is crucial to pay attention to indicators such as the RSI to identify potential buying or selling opportunities. By staying informed and conducting thorough research, investors can make more informed decisions about their stock portfolios.