Many investors are becoming comfortable with trading options to manage risk and returns. Buying low and selling high is a tried-and-true strategy for building wealth through stocks. But how can you find oversold stocks?
One answer is to follow a technical indicator called the Relative Strength Indicator (RSI). This commonly used indicator helps traders and investors gauge a stock price’s momentum.
The RSI index ranges from 0 to 100. On any given day, most stocks trade between 30 and 70. When a stock has an RSI above 70, it generally means a stock is overbought. Any measurement of 30 or lower indicates typically an oversold condition. Since those levels predict (but don’t guarantee) a reversal, the RSI can give investors good entry and exit points.
One note of caution. RSI is volatile, and it’s not uncommon to see an individual stock move from oversold to overbought in days if not hours. The oversold stocks on this list had an RSI between 30 and 40 as of the opening of trading on July 23, 2024.
Air Products & Chemicals (APD)
In the past five years, industrial gases were not the most exciting segment for investors. But if you’re looking for oversold stocks to buy, Air Products & Chemicals (NYSE:APD) is creating a solid option. APD stock has delivered a total return of 23.67% over the past five years. That includes the company’s dividend, which yields 2.83%.
Investors could have found more “magnificent” returns in technology stocks. But the market is always forward-looking. If you’re considering Air Products & Chemicals, that means looking at its investments in hydrogen, particularly green hydrogen. The company has two catalysts in this area.
First, in June 2024, the company signed a 15-year contract with TotalEnergies (NYSE:TTE). Beginning in 2030, this will have APD supplying 70,000 tons of green hydrogen annually to European refineries. The company also plans to build a $4 billion green hydrogen plant in Texas. It’s also important to note that Air Products & Chemicals is the world’s leading patented LNG technology and equipment provider.
Celsius (CELH)
Celsius (NASDAQ:CELH) manufactures a healthy, low-calorie line of energy drinks and liquid supplements. The stock has been soaring since 2020 as interest in health and wellness has grown across nearly every demographic. Investors also reward the company for its distribution agreement with PepsiCo (NASDAQ:PEP).
However, when PepsiCo announced it was oversupplied with Celsius products, CELH stock dropped 33% in the last three months and had an RSI of around 25 as of July 23. This puts it in the ranks of oversold stocks. However, with the stock trading near its 52-week low, this looks like a prime buying opportunity for investors who missed the run-up earlier this year.
To begin with, Celsius continues to post strong year-over-year (YOY) growth on the top and bottom lines. And analysts are projecting a 29% increase in earnings in the next 12 months. That’s likely why analysts have a consensus price target of $78.65 for CELH stock. That would be a 63% gain from the stock’s current price.
Cameco (CCJ)
Cameco (NYSE:CCJ) is the least oversold of the oversold stocks on this list. Shares of the world’s largest publicly traded uranium company have an RSI of around 40. But it was at around 66 in early June. The decline in the stock correlates to a drop in the spot price of uranium.
The “other” yellow metal was at near-record highs earlier in the year but has fallen back. Still, uranium is trading at highs not seen since 2008. And this time, it may have legs.
That’s because the world is coming around to the idea that nuclear energy is one of the only truly “clean” forms of renewable energy. You can see that in the price performance of CCJ stock, which has continued to be up for the year, even as the spot price of uranium is down.
The total return on CCJ stock over the last five years is an impressive 370.25%. With earnings expected to grow by over 85% in the next 12 months, the stock could have a significant upside ahead.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
