The recent market sell-off has brought an end to a winning streak for the S & P 500, causing all three major averages to be on track for losses on the week. Despite Friday’s inflation gauge meeting expectations, the S & P 500 and the Nasdaq Composite are looking to break their five-week winning streaks, while the Dow Jones Industrial Average is facing back-to-back weekly losses. One of the primary contributors to this sell-off was Dow member Salesforce, which experienced a significant drop of about 19% during the week due to a revenue miss and weak guidance announcement.
Identifying Opportunities in the Market
With the market downturn presenting potential opportunities for investors, CNBC Pro conducted a screening to identify the most overbought and oversold stocks on Wall Street based on their 14-day relative strength index (RSI). Stocks with an RSI below 30 are considered oversold, indicating that they may be poised for a rebound. On the other hand, an RSI above 70 suggests that a stock is overbought and could be due for a pullback.
Key Stocks to Watch
One of the standout oversold stocks identified was Salesforce, with a 14-day RSI of 16.4 and a year-to-date decline of 13%. Despite the recent sell-off, many analysts remain optimistic about the stock, citing its potential in the artificial intelligence (AI) space. Goldman Sachs described Salesforce as an “under-appreciated Gen-AI winner,” while Morgan Stanley highlighted the future benefits from AI. Analysts predict a surge of more than 37% in Salesforce shares from current levels.
Another notable oversold stock is Bristol-Myers Squibb, which has fallen more than 2% week to date and is down about 20% in 2024. The company is implementing a cost-cutting initiative to drive efficiency, which analysts believe could lead to a potential rally of over 29% in its shares.
On the overbought side, tech company HP emerged as the most overbought stock, with an RSI nearing 90 after a 17.1% surge in the week. While HP reported strong earnings and revenue in its fiscal second quarter, analysts caution that the stock may not be able to sustain its rise, with a consensus target implying a potential 5% decline from current levels.
Ralph Lauren is another overbought stock that saw a nearly 7% increase for the week, driven by its fiscal fourth-quarter earnings beat and a 10% dividend increase. Analysts foresee more than 3% upside potential in Ralph Lauren shares from their current levels.
The current market sell-off has created both challenges and opportunities for investors. By carefully analyzing oversold and overbought stocks, investors can strategically position themselves to take advantage of potential rebounds or pullbacks in the market. It is essential for investors to conduct thorough research and consider various factors before making investment decisions in the current market environment.
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