Momentum is an important concept in the trading landscape. More investors piling into a stock helps drive a price up; and vice versa.

That’s good, up to a point. But too much buying can leave a stock ranked highly on the Relative Strength Index (RSI) — a calculation that measures which stocks are looking a little too hot (and cold).

For a detailed description of how it works, click here.

Each week, Stockhead provides a simple summary of outliers on the RSI, to get a technical gauge of how trading momentum is affecting the price action.

A reading of 70 is seen as the level at which a company’s been overbought. If a stock has a reading of 30 or below, it may be undervalued. Here’s this week’s list:

Running hot

Over the past two weeks, 16 companies recorded an RSI reading of at least 75.

Topping the list was Advance Nanotek (ASX: ANO), the zinc-based sunscreen manufacturer.

The share price ripped higher on Friday, after the company announced an unexpected increase in US sales orders. It’s been a monster year for ANO, which so far is the best performing stock on the ASX.

A string of new commercial deals and profit upgrades saw the share price close at $7.02 on Friday, a 2019 gain of 624 per cent.

Here’s a summary of the stocks that were running hot for the two weeks ended Friday, May 24:

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Running cold

There were 22 stocks on the unloved list this week, with RSI readings of 25 or less.

Lionhub Group (ASX: LHB) had the lowest ranking with a reading of just 11.56.

In this case though, the technical momentum appears to be justified; Lionhub’s fundamentals aren’t looking too healthy either.

The company responded to an ASX query on Friday, and said it “expects that it will continue to have negative operating cash flows for the time being”. It’s also dealing with outstanding issues at sites in Singapore and China.

Here’s a summary of the stocks that were running cold for the two weeks ended Friday, May 24:

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