When a stock gets hammered hard enough, technical traders start paying attention. The energy sector has a few names right now that look particularly beaten up, at least according to one popular momentum indicator.
The Relative Strength Index, or RSI, is a momentum tool that compares how strong a stock is on up days versus down days. It's basically a way to measure whether something has been pushed too far in one direction. When the RSI drops below 30, the conventional wisdom says a stock is oversold. That doesn't guarantee a bounce, but it does suggest the selling pressure might be overdone. Think of it as a stock that's been punished enough that some bargain hunters might start circling.
Here are three energy stocks currently flashing oversold signals, each with their own story about why they've been under pressure lately.
Delek US Holdings Inc
Delek US Holdings Inc. (DK) has had a rough month, with shares dropping around 9%. The stock closed at $29.01 on Thursday after falling 3.8%, and it's currently sitting well above its 52-week low of $11.02 but clearly under some selling pressure.
RSI Value: 29.9
On January 15, JP Morgan analyst Zach Parham maintained a Neutral rating on the stock but trimmed his price target from $42 down to $38. That's not exactly a ringing endorsement, but it's not a disaster either. The company has an Edge Stock Ratings momentum score of 71.40, suggesting some underlying strength despite the recent weakness.
Expand Energy Corp
Expand Energy Corp (EXE) is showing an even deeper oversold reading after declining about 7% over the past month. Shares dipped 1.9% to close at $99.52 on Thursday, still above the 52-week low of $91.02 but clearly losing altitude.
RSI Value: 28.7
UBS analyst Josh Silverstein is more optimistic about this one. On January 8, he maintained a Buy rating while lowering his price target from $154 to $150. That still implies significant upside from current levels, even after the haircut to his target. The analyst clearly thinks the recent weakness is creating an opportunity rather than reflecting fundamental deterioration.
XCF Global Inc
XCF Global Inc (SAFX) is in a different category altogether. This stock has been absolutely crushed, falling around 65% over the past month. It closed at $0.14 on Thursday after gaining 2.8%, sitting just above its 52-week low of $0.12.
RSI Value: 21.4
That's the lowest RSI of the three, suggesting the most extreme oversold conditions. The reason for the carnage? On January 15, XCF Global filed to offer up to 187.18 million shares of Class A common stock. That's a massive dilution event for existing shareholders, which explains why the stock got hammered. When you're about to flood the market with new shares, the existing ones tend to lose value in a hurry.
An oversold reading doesn't mean a stock is automatically a good buy. It just means the selling has been intense and may have pushed things too far too fast. Sometimes stocks are oversold for very good reasons, as the XCF Global situation illustrates. Other times, like potentially with Expand Energy where an analyst still sees substantial upside, the weakness might be creating an actual opportunity.
The RSI is just one tool among many, and it works best when combined with fundamental analysis and an understanding of why a stock has been under pressure in the first place.
