3 stocks with oversold RSI indicate strong buying opportunities

There’s nothing better than feeling like you’ve found a deal or are getting a good deal, and it’s no different when it comes to stocks. One of the most popular technical indicators to help do this is the Relative Strength Index (RSI).

Every action has one. It works by taking a stock’s recent performance over the last 14 trading days and outputting a number between 0 and 100. An RSI reading above 70 suggests overbought conditions, while a reading below 30 indicates oversold conditions. The more extreme the reading, the more pronounced the suggested market condition.

With stocks, in general, having experienced some of their worst weeks of the year so far, many previously flying stocks have borderline oversold RSI readings. For example, the benchmark S&P 500 index has gone from having an RSI in the upper 60s at the start of the month to one now in the lower 30s.

Investor sentiment has cooled significantly following the unexpected pick-up in inflation, but there is no reason to panic yet. If anything, this sell-off will represent a healthy correction in what is otherwise a solid uptrend that still has plenty of room to run. With this in mind, let’s take a look at 3 stocks with particularly interesting RSI readings that point to entry opportunities.

$270.45

-1.47 (-0.54%)

(As of 04/19/2024 ET)

52 week interval

$190.57

▼

$318.71

Dividend yield

0.15%

P/E ratio

64.39

Price target

$307.87

Having hit an all-time high as recently as February, technology titan Salesforce is the perfect example of a high-performing stock that has quickly become oversold in recent weeks. An RSI reading of 29 confirms its oversold status, as do the multitude of analyst updates on the stock this month alone.

Stifel Nicolaus and the team at Needham & Company reiterated their Buy rating on Salesforce shares. Just last week, Royal Bank of Canada rated them Outperform and raised their price target to $350. Just this week, JMP Securities and Wolfe Research did the same, both reiterating their Outperform ratings on Salesforce shares, with Wolfe giving them a high price target of $365.

Considering that Salesforce closed just above $270 last night, that indicates an upside of about 35% and investors should be excited.

$465.02

-8.16 (-1.72%)

(As of 04/19/2024 ET)

52 week interval

$331.89

▼

$638.25

P/E ratio

44.46

Price target

$620.72

While it failed to break out of its 2021 high, Adobe is another tech titan that halted its multi-year rally last month. Since posting gains of more than 130% from the 2022 low through February of this year, its shares have been on the defensive. They are currently down 25% and have an RSI reading of just 32.

However, as with Salesforce, they have received a series of analyst updates that all point to the same thing; this is starting to become a serious buying opportunity. In the past few weeks alone, Evercore ISI, Royal Bank of Canada and Mizuho have reiterated their Outperform ratings on Adobe stock.

So did Oppenheimer, DA Davidson, and Piper Sandler, the latter giving Adobe a $700 price target that only got more attractive. From the $473 Adobe closed at Thursday evening, that indicates a targeted upside of nearly 50%. Not bad for a $210 billion company, right?

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Lamb Weston

$81.00

+0.71 (+0.88%)

(As of 04/19/2024 ET)

52 week interval

$77.41

▼

$117.38

Dividend yield

1.78%

P/E ratio

10.81

Price target

$117.40

The latest is Lamb Weston, one of the largest food manufacturers and producers of frozen French fries in the world. Their shares were on the verge of an all-time high last quarter, when a bungled internal software implementation devastated their earnings.

This is a fairly rare event for a company to face, but the effect on Lamb Weston’s shares has been huge. The transition from one Enterprise Resource Planning (ERP) system to another was not smooth and instead resulted in a temporary loss of visibility into distribution-ready inventories. This meant customer orders remained unfilled to such a degree that they squeezed Lamb Weston’s margins to the point that $72 million was cut from their net income for the fiscal third quarter.

Shares are down as much as 30% from their pre-earnings peak, but they are already consolidating and starting to turn north again. This helped lift the stock’s RSI from extremely oversold conditions into the mid-teens, but at 28 it still looks like a bargain. A series of Buy and Outperform ratings from analysts in recent weeks have only strengthened the likelihood that this is a temporary, albeit embarrassing, blip, and investors should be eyeing a potential rapid rebound.

Before you consider Adobe, you’ll want to hear it out.

MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Adobe wasn’t on the list.

While Adobe currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View the five stocks here