Seek (ASX: SEK) has wound up as one of the most oversold stocks on the ASX 200 amid a persistent downtrend in one of the business's most important indicators – Australian job ads.
Since early March, the stock has tumbled almost 30%, declining in 15 of the last 17 trading sessions. The successive decline has pushed the stock into extreme oversold territory, with its Relative Strength Index (RSI) now sitting at just 23.3 – a level of weakness comparable with the depths of March 2020.
Historic returns from oversold levels
Since 2008, Seek has traded at an RSI below 28.3 – which represents two standard deviations from the mean – only 92 times. And around a third of these instances occurred in 2008-09 and 2020. In other words, you rarely see the stock subject to so much successive selling.
To analyse the forward returns from oversold conditions, we examined the first instance of RSI below 28.3 in each month, which yielded 23 data points. The results show:
Source: Market IndexShort-term forward returns are relatively lackluster, with mixed success rates. However, the data shows a more positive trend at the 12-month mark, with even stronger performance evident at 24 months.
Full article:
marketindex.com.au/news/seek-is-the-most-oversold-stock-on-the-asx-200-where-does-it-go-from-here
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