Netflix (NFLX) has been in a slump lately, witnessing a sharp 12.7% decline over the past four weeks. Market forces have pushed the stock into the red, but signs are emerging that a turnaround might be imminent.
Understanding Oversold Stocks
The Relative Strength Index (RSI) is a vital tool for identifying oversold stocks. This momentum oscillator, fluctuating between zero and 100, indicates oversold conditions when the RSI falls below 30.
Regardless of a company’s fundamentals, all stocks move between overbought and oversold territories. The RSI acts as a quick gauge to ascertain if a stock is due for a rebound after being sold below its fair value.
While RSI offers valuable insights, it should not be the sole basis for investment decisions.
Indications of Trend Reversal for NFLX
With an RSI reading of 24.01, Netflix (NFLX) shows signs of selling exhaustion, hinting at a potential bounce-back to restore the equilibrium between supply and demand.
Besides the technical indicators, there is a fundamental aspect at play. Consensus among analysts predicting better earnings for NFLX has led to a 4.2% surge in EPS estimates over the last month. Historically, upward revisions in earnings forecasts often drive stock price appreciation.
Moreover, Netflix currently holds a Zacks Rank #2 (Buy), highlighting its positive trend in earnings estimate revisions and EPS surprises, placing it among the top 20% of ranked stocks. This further strengthens the case for a potential turnaround in the near future.
Could this really be the time for a comeback, or is it just a fleeting rise? Only time will tell.