BrightSphere Investment Group (BSIG) has been on a downward spiral lately with significant selling pressure. After falling 17.9% in the past four weeks, the stock appears well positioned for a trend reversal as it is now in oversold territory and Wall Street analysts strongly agree that the company will release. better profits than she had previously predicted.
Here’s how to spot oversold stocks
We use the Relative Strength Index (RSI), one of the most commonly used technical indicators, to determine if a stock is oversold. It is a dynamics oscillator that measures the speed and change of price movements.
The RSI hovers between zero and 100. Usually, a stock is considered oversold when its RSI reading drops below 30.
Technically, each stock oscillates between overbought and oversold regardless of the quality of its fundamentals. And the beauty of RSI is that it helps you quickly and easily check whether a stock price is reaching a turning point.
So, according to this metric, if a stock has fallen too below fair value simply because of unwarranted selling pressure, investors may begin to look for opportunities to enter the stock to take advantage of the inevitable rebound.
However, like any investment tool, RSI has its limitations and should not be used alone when making an investment decision.
Here’s why BSIG could experience a turnaround
The RSI reading of 26.8 for BSIG is an indication that massive selling may be running out, so the stock may rebound in a quest to strike the old balance of supply and demand.
The RSI value is not the only factor indicating a potential reversal of the stock in the short term. On the fundamentals side, there has been strong agreement among sell-side analysts covering the stock to increase earnings estimates for the current year. Over the past 30 days, the consensus estimate of BPA for BSIG has risen 0.7%. And an upward trend in revisions to earnings estimates usually translates into price appreciation in the near term.
Additionally, BSIG currently has a Zacks Rank # 2 (Buy), which means it is in the top 20% of over 4,000 stocks we rank based on trends in earnings estimate revisions and surprises in the market. BPA. This is a more conclusive indication of the potential for a reversal in the short term. You can see the full list of today’s Zacks Rank # 1 (strong buy) stocks here >>>>
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.