2 Oversold Stocks That Could Be Great Buys Today

Canadian Natural Resource Ltd. (TSX:CNQ)(NYSE:CNQ) has been on a big decline in the past month, and it could be a great time to buy the stock on a dip.

| More on:
Man holding magnifying glass over a document

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Many stocks today are valued at obscene levels and are trading at more than a hundred times their earnings, and, in some cases, share prices are soaring in industries where profits are scarce. For investors looking to invest at reasonable prices, it can be hard to find good buying opportunities.

One way that you can try and find a good buy is by using technical analysis to find a stock that has been heavily sold and that could be due for a recovery. The Relative Strength Index (RSI) is one indicator I always go back to due to its simplicity and because it can quickly highlight stocks that have been oversold or overbought.

The RSI looks at a stock’s gains and losses over the past 14 trading days; when the value dips below 30, it indicates that the stock has been oversold and could be due for a reversal. A value of 70 or over indicates there’s been a lot of buying and that the stock could see some pullback soon.

However, I’m going to focus on the former, and the two stocks below are both below a 30 RSI and could be good opportunities to buy today.

Canadian Natural Resource Ltd. (TSX:CNQ)(NYSE:CNQ) has seen a lot of heavy selling in the past month, with its share price plummeting 14%. Despite an improvement in its earnings in the most recent quarter, the oil and gas industry has been a bit more bearish lately, as oil prices have started to lose momentum, and worries about production ramping back up have spooked investors.

As a result, Canadian Natural’s stock was at an RSI of just 27 at the close of last week, meaning it could be overdue for a spike back up in price. The last time the stock was at this low of an RSI was back in February, when it was under 27 and had closed at a price of $38.62.

The share price would go on to rise to well over $40 in the months ahead and could have netted a strong profit for those that bought on the dip; however, there’s no guarantee we’ll see that happen again.

AGT Food and Ingredients Inc. (TSX:AGT) is another stock that has been on a double-digit decline in the past month, with its share price losing more than 10% of its value. The company saw the drop in price happen days after an earnings release that showed revenues for the quarter were down more than 24% from a year ago.

The sell-off in price put the stock at an RSI of 26 and well into oversold territory. Like Canadian Natural, AGT has been here before. Back in March, the stock had dipped to an RSI of just 14 when it closed at under $15 a share. It would go on to rise to over $17, but it too would eventually fall back down in price.

AGT’s stock is trading around its book value, and so you don’t have to worry about paying much of a premium for the stock today. Given its struggles, it may not be an optimal long-term buy, but in the short term there could be an opportunity to turn a profit.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned. AGT Food is a recommendation of Stock Advisor Canada.

More on Investing

growing plant shoots on stacked coins
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy Now and Own for 25 Years

These top TSX dividend stocks look oversold and now offer attractive yields for TFSA and RRSP investors.

Read more »

money cash dividends

Passive-Income Power: How to Make $105/Week TAX FREE in a Bear Market

Investors may want to pursue a passive-income strategy in this bear market by snagging dividend stocks like Freehold Royalties Ltd.…

Read more »

Money growing in soil , Business success concept.
Energy Stocks

3 Growth Stocks up +30% in 2022

These three growth stocks are up over 30% in 2022 alone but have come down in the last few weeks…

Read more »

Oil pumps against sunset
Energy Stocks

2 Energy Stocks That Jumped Over 60% This Year

Consider investing in these two energy stocks amid the recent pullback after putting up stellar gains earlier this year.

Read more »

Profit dial turned up to maximum
Dividend Stocks

RRSP Investors: 2 Undervalued TSX Stocks to Buy Now for Total Returns

Top TSX dividend stocks are now on sale for RRSP investors seeking attractive total returns.

Read more »

TFSA and coins
Dividend Stocks

2 Beaten-Down Stocks to Buy for Your TFSA

Two beaten-down, but high-yield TSX stocks are profitable options for TFSA investors.

Read more »

Volatile market, stock volatility
Stocks for Beginners

3 Top TSX Stocks to Buy in Volatile Markets

Sitting on cash? Consider these three TSX stocks for the long term.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

Inflation Soars to 7.7%: 1 Dividend Stock to Buy Now

Enbridge (TSX:ENB)(NYSE:ENB) stock looks like a magnificent dividend stock to help Canadians deal with inflation at 7.7%.

Read more »