A major market rotation has left some stocks more vulnerable to a pullback, even though the broader market is down for the week. The S & P 500 has dropped nearly 2% for the week, putting the broad-market index on pace for its worst weekly performance since April. The tech-heavy Nasdaq Composite has lost about 3.7%, poised to snap a coming in six-week winning streak, while the Dow is about 0.7% higher. Those moves come as traders rotate out of major tech names in favor of small caps and cyclical stocks that could benefit from Federal Reserve interest rate cuts. The small cap-focused Russell 2000 has climbed 1.8% this week. This market shift has pushed some S & P 500 stocks into overbought territory despite the index’s decline. Against CNBC Pro screened for the most overbought and oversold names in the S & P 500 based on their 14-day relative strength index, or RSI. A stock with a 14-day RSI greater than 70 is considered to be overbought and at risk of a pullback. An RSI reading lower than 30, on the other hand, means a stock is oversold and could make a short-term comeback, given possibly worsening sentiment surrounding the name. Take a look at some of the overbought names: Ford Motor made the overbought list, with the stock scoring an RSI of about 83.2. Shares could drop 3.9% over the next year, however, according to analysts’ average price target. Ford shares are up 16.4% this year and reached a 52-week high on Thursday. As traders anticipate central bankers to cut interest rates beginning in September, they’ve rotated into companies like Ford on the hope that lower interest rates on car loans could boost consumer demand for vehicles. Already, the automaker is facing high demand and announced this week that it is investing $3 billion into ramping up its Super Duty truck production. Information management services company Iron Mountain is also overbought, with an RSI of 78.62, and is at risk of the biggest pullback of the list, of about 10.6%. This year, shares have soared more than 39.8% as the real estate investment trust has garnered attention from investors for its AI data center buildouts. Goldman Sachs reiterated its buy rating on Iron Mountain in a June note, citing its “significant expansion strategy in its data center business globally, fueled in large part by Gen AI.” The company has signed an increasing number of hyperscaler clients since 2020, which often have larger eases, better credit and longer contract durations that average between 12 and 15 years, the bank said. Another real estate name, Prologis , is also overbought. Shares are down 7.4% for the year but have popped more than 9% over the past month. The stock can add 8.8% over the next year, according to analysts’ consensus price target. Despite this momentum, Prologis is at risk of a near-term pullback given its high RSI. Analysts are cautiously optimistic on the company’s recovery timeline, but enthused by its second-quarter earnings beat that reflected a pickup in leasing activity and strong core operations. Other overbought stocks include S & P Global and Republic Services. Here’s a list of the most oversold names in the broader market, meanwhile: Domino’s Pizza made the cut with a 22.4 RSI and an average price target that suggests shares can jump nearly 29%. That would mark a major comeback for the pizza chain, which plunged about 16.9% this week after reporting mixed second-quarter financial results. Domino’s posted earnings that came out above analysts’ expectations but revenue that was in line with estimates. The company also reported its U.S. comparable store sales grew slightly less than forecast, dragging the stock lower. Charles Schwab could also see a bounce after its shares have lost nearly 14% over the past month, fueled by second-quarter earnings that disappointed Wall Street as the bank’s deposits had fallen and supplemental borrowing increased during the period. Analysts surveyed by LSEG rate the stock a buy and think it has roughly 24.2% potential upside, however, suggesting the market’s punishment has been too severe. Other oversold stocks include Walgreens Boots Alliance and footwear companies Nike and Deckers Outdoor .
https://image.cnbcfm.com/api/v1/image/107433027-1719336189842-gettyimages-450575022-80349100.jpeg?v=1719336250&w=1920&h=1080
Source link
