Air Transport Services (ATSG) loses 11.2% in 4 weeks, here’s why a trend reversal could be imminent
Air transport services (ATSG) has been on a downward spiral lately with significant selling pressure. After falling 11.2% over the past four weeks, the stock looks well positioned for a trend reversal as it is now in oversold territory and Wall Street analysts agree the company will post strong better profits than they predicted earlier.
How to determine if a stock is oversold
We use the Relative Strength Index (RSI), one of the most commonly used technical indicators, to determine if a stock is oversold. It is a momentum oscillator that measures the speed and change of price movements.
The RSI fluctuates between zero and 100. Usually, a stock is considered oversold when its RSI reading falls below 30.
Technically, every stock oscillates between overbought and oversold, regardless of the quality of its fundamentals. And the beauty of the RSI is that it helps you quickly and easily check if a stock price is reaching a reversal point.
So, by this metric, if a stock has fallen too far below its fair value simply because of unwarranted selling pressure, investors may start looking for opportunities to get into the stock to benefit from the inevitable bounce.
However, like any investment tool, the RSI has its limitations and should not be used alone to make an investment decision.
Why the ATSG Could Rebound Before Long
The RSI reading of 28.43 for ATSG is an indication that the strong selloff may be running out, so the stock may be bouncing back in a quest to reach the old supply and demand balance.
The RSI value is not the only factor that indicates a potential rally in the stock in the short term. On a fundamental level, there was strong agreement among bear analysts covering the stock to raise earnings estimates for the current year. Over the past 30 days, the consensus EPS estimate for the ATSG has increased by 3.8%. And an upward trend in earnings estimate revisions usually translates into short-term price appreciation.
Additionally, ATSG currently has a Zacks Rank #2 (Buy), which means it is in the top 20% of over 4,000 stocks that we rank based on trends in earnings estimate revisions and surprises. BPA. This is a more conclusive indication of the stock’s potential recovery in the near term. You can see the full list of today’s Zacks Rank #1 (Strong Buy) stocks here >>>>
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Air Transport Services Group, Inc (ATSG): Free Inventory Analysis Report
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