Have these ASX stocks been sold off too much?
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It has been a tough few months for equity markets but there are hints that perhaps, among small caps, the selling has gone too deep.
Small cap investors have felt the pain as overseas and local factors, such as a squeeze on lending requirements and slow wage growth, pinched on local sentiment.
The ASX200 lost more than 12 per cent since the start of September, but the Small Ordinaries is down more than 14 per cent.
And after a number of US financial institutions, including investment banks Goldman Sachs and JP Morgan, said on Monday that investors were worrying too much, there could be signs that investors have been selling too hard.
One common metric to work out whether a stock has been oversold is the Relative Strength Index (RSI).
It combines average gains and losses during a time period and compares the momentum of the two, effectively looking at whether the momentum has been towards buying or selling.
An RSI of 30 or below may indicate a stock has been oversold, whereas an RSI at or above 70 may indicate a stock has been overbought.
Traders can infer from the data that a turnaround is imminent — but as with many financial metrics seeking to foretell the future, this is not guaranteed.
Here are all the small-cap ASX stocks with an RSI of 30 or below based on their last 30 days of trading.
While many stocks on the ASX have dropped as part of the broader equity sell off, some stocks on this list have been because of factors within the company.
One example is Factor Therapeutics (ASX:FTT), which plunged 95 per cent when a clinical trial failed badly enough for the CEO to admit the company had no future.
The smallest RSI was recorded by Marley Spoon (ASX:MMM). After listing at $1.42 a share, it has been in free-fall since late August when it announced an operating loss around $30.9m.
Despite announcing revenue growth, higher productivity and increased consumer numbers, its cash burn was enough for investors to sell the stock and the selling has continued into the last month.
The second smallest RSI belongs to National Tyre and Wheel (ASX:NTD). The stock has been in a downward trend since its full year results in late August but investors increased their selling since their most recent quarterly results.
While the company is profitable and scheduled to pay a dividend; its sales have been slower than expected.
Yet even if a company is profitable or on track to be, incidents or impediments in or outside a company’s control can spook investors.
For instance DropSuite (ASX:DSE) has an RSI of 27.67 after a month of selling, triggered by the decline in its user base after a Latin American partner deactivated the service for 420,000 users who were not deemed to be using its service.
Alternatively, investors may just lack patience.
Murray River Organics (ASX:MRG) has had a shocker run since announcing the first of a series of profit and inventory downgrades in early 2017.
After months of boardroom quarrels, strategic reviews, and turn around plans, the grape grower told long-suffering shareholders that its plans would only realise benefits in the 2019-2020 growing season.