3. Fortescue’s Big Selloff

Fortescue experienced its worst selloff in almost a year after a large fund manager offloaded $1.1 billion worth of shares at a 6% discount. This event – In parallel with falling iron ore prices, dragged Fortescue down as much as 20% over the past 21 sessions. The stock was trading at an RSI of 20.9 on Tuesday. You almost never see Fortescue this oversold – An RSI of 20.9 is approximately 2.75 standard deviations from the average. In other words, Fortescue does not trade like this 99.4% of the time. I took a deep dive into how Fortescue historically performs after reaching such oversold levels. You can read my full article here – but here are the forward returns since 2008.

Fortescue’s forward returns for when it trades below an RSI of 28 (two standard deviations from the mean). The data only counts the first instance in each month when the RSI is below 28.

The forward returns are extremely compelling but the big question is – How reliable is historic data for a company that’s making an aggressive push from iron ore into green hydrogen? (Which is eating away at its dividend payout ratio and free cash flow)