Software shares are among the most oversold stocks in the S&P 500
A handful of software giants such as Intuit and Palantir were among this week’s most oversold stocks, according to one popular technical metric. Major stock averages are coming off of a rocky trading week. Losses in technology companies weighed on the S & P 500 and the Nasdaq Composite on Friday, as mixed earnings results from the “Magnificent Seven” dampened investor sentiment around the strength of the bull market rally. Software stocks plunged into bear-market territory on Thursday. The S & P 500 eked out a small gain this week, but both the Nasdaq and 30-stock Dow closed in the red. The latter was dragged down by a massive plunge in UnitedHealth Group this week. Investors can find opportunities in beaten-down stocks after these losses. Stocks now considered oversold — meaning their 14-day relative strength index, or RSI, is below 30 — are prime targets for a near-term bounce. Stocks are considered overbought and at risk of further declines when their RSI tops 70, meanwhile. Take a look at the market’s most oversold companies below: Palantir shares lost more than 13% this week, a stunning decline after the stock’s rally over the past year. The plunge comes amid the broader rout in traditional software companies on fears of intensifying competition from artificial intelligence models . RBC Capital Markets analyst Rishi Jaluria on Jan. 26 also maintained his underperform rating and $50 price target on Palantir shares, which implies 67% potential downside ahead. “Absent a substantial beat-and-raise quarter elevating the NT growth trajectory, valuation seems unsustainable,” the analyst wrote. Palantir is expected to report earnings after Monday’s market close. The stock has an RSI of 26.3. Other software stocks in oversold territory are Intuit , Paycom Software , Tyler Technologies , Salesforce and ServiceNow . ServiceNow on Wednesday beat Wall Street’s fourth-quarter earnings expectations and gave better-than-expected guidance. But the results didn’t ease concerns that investors have that artificial intelligence could upend the software business models. ServiceNow plunged more than 12% this week. Memory stocks topped the Street’s overbought names this week, meanwhile. Soaring memory prices tied to data center compute demand continue to drive up the names of memory chip manufacturers. Shares of Sandisk and Lam Research jumped 22% and 7% this week, respectively, after reporting earnings results. Hot computer memory maker Micron gained about 4% week to date. Sandisk, which has an RSI of 88.4, on Thursday posted solid second-quarter earnings growth driven by 64% growth in its data center business. The company also delivered strong third-quarter revenue guidance. Raymond James analysts upgraded Sandisk shares to an outperform rating following results, citing the company’s pricing power as supply remains tight. Data storage provider Seagate Technology is also considered overbought, with an RSI of about 80. Shares jumped almost 18% this week on the back of Seagate’s strong fiscal second-quarter results.
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