Market Sell-Off Presents Opportunities for Investors Amidst Volatility

Market Sell-Off Presents Opportunities for Investors Amidst Volatility

The recent market sell-off has broken a winning streak for the S & P 500, causing all three major averages to be on pace for losses on the week. Despite this downturn, there are opportunities for investors to gain exposure before a potential rebound. Both the S & P 500 and the Nasdaq Composite are set to snap five-week winning streaks, while the Dow Jones Industrial Average is tracking for back-to-back weekly losses.

Dow member Salesforce experienced 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. Despite this, many Wall Street analysts remain optimistic about the stock and its artificial intelligence-related prospects, maintaining a consensus buy rating. Goldman Sachs even referred to the company as “an under-appreciated Gen-AI winner,” emphasizing the future benefits from AI technology.

Most Overbought and Oversold Stocks on Wall Street

With the market volatility in mind, CNBC Pro screened for the most overbought and oversold stocks on Wall Street using the 14-day relative strength index (RSI). Stocks with a 14-day RSI below 30 are considered oversold, indicating that shares may be due for a comeback. On the other hand, a 14-day RSI above 70 suggests that a stock is overbought and may soon experience a pullback.

Salesforce, with a 14-day RSI of 16.4, was identified as one of the most oversold stocks of the week. Year to date, the stock is down 13%, with shares falling roughly 20% in just one day. Despite the recent decline, analysts forecast that shares could surge more than 37% from current levels. Similarly, biopharmaceutical company Bristol-Myers Squibb was also highlighted as an oversold stock, with shares down about 20% in 2024. However, analysts see the potential for shares to rally more than 29% based on the average price target.

On the other end of the spectrum, there are some overbought stocks that have seen significant gains. Tech company HP surged 17.1% this week, making it the most overbought stock with an RSI close to 90. Although half of the analysts covering HP rate the stock as a strong buy or buy, the consensus analyst price target implies that shares may fall more than 5% from current levels. Similarly, Ralph Lauren rose almost 7% for the week and has an RSI reading of 76.9. Analysts see more than 3% upside from current levels, with the company’s fiscal fourth-quarter earnings exceeding estimates.

The recent market sell-off has created both challenges and opportunities for investors. As some stocks become oversold, there may be potential for a comeback, while others that are overbought may experience a pullback. It is crucial for investors to carefully analyze market data and individual stocks to make informed decisions during times of volatility. By staying informed and leveraging tools like the RSI index, investors can navigate the market fluctuations and potentially benefit from opportunities for growth.

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