Bad press, external forces (weather, global economic shifts, supply challenges), and an overall downtrending market can all lead to a stock being oversold. Technically a stock is “oversold” when it’s RSI or Relative Strength Index has dropped below 30. On the surface, this would seem like a ticker to avoid, but many analysts scan for oversold stocks that are set to rebound.

Currently one of the most oversold stocks is Hertz (HTZ). But is it toxic or is it a bargain? Here are some important considerations.

In late June HTZ took a 40% plunge when it had very unpleasant earnings that saw it downgraded. But for every household brand that sees a big crash and evaporates into the history books, there are many more that crash and then stage a recovery. The big factors that are plaguing HTZ are dropping used car values, ugly debt restructuring, and an unappealing earnings forecast.

But there are hints that it has hit a bottom and has nowhere to go but up. Take a look at the chart:

The depth of the RSI is glaring, as is the blood red drop that followed the massive gap down a few weeks ago. But look at the last few candles and you’ll see an attempt to find support. While this could be a classic dead cat bounce, the MACD is also trying to flip up and stage a bullish crossover.

There are things that HTZ can do to generate the optimism needed to winch itself out of this hole. Shifting to digital use car sales can help them generate more margin when they sell their fleet to buy newer cars. They also need to capitalize on the growing interest in non-airport car rentals.

The way that plays out on the chart looks like a classic short squeeze. Any good news that fuels a rebound forces sellers to buy stock and accelerates the recovery rally.

In the meantime, keep an eye on the MACD Bullish Crossover at the bottom of the chart. That will be the first sign that this falling knife has truly hit the ground.

Keep learning and trade wisely,

John Boyer

Editor

Market Wealth Daily