Many investors are viewing shares of Fred’s, Inc. (NASDAQ:FRED) to be “oversold” as the equity reached $9.06 on a recent check. An oversold stock has a current price that an investor thinks is lower than the inherent value of the stock. Meaning they expect the price of the stock to go up at some point. It is generally desirable to buy stocks when they are oversold. The investor believes he or she is getting a bargain and will profit from their purchase when they sell it off in the future. From a technical standpoint, “oversold” can simply mean that the stock is having a Relative Strength Index (RSI) under 30.
Fred’s, Inc. (NASDAQ:FRED) RSI currently stands at 18.69.
RSI was a creation of market researcher J. Welles Wilder Jr. who explained concept in his book, “New Concepts in Technical Trading Systems,” published in 1978. The Relative Strength Index is a technical analysis oscillator which shows price strength when comparing and contrasting downward and upward movements. It can indicate oversold and overbought price levels for a given stock.
When looking at companies that are considered to be oversold, it is important to consider the moving averages of the security. We see here that the stock is -9.95% away from the 20-Day Simple Moving Average. Their 50-Day Simple Moving Average is a difference of -27.61% from current levels. Further back, their 200-Day Simple Moving Average is -36.30% difference from today’s price. Currently, the stock is -44.27% from its 50-Day High and 0.11% from the 50-day low.
Based on the stock’s volatility for the week, which is a statistical measure of the dispersion of returns for a given stock and represents average daily high/low percentage range of 3.77% and month of 3.77%. So are analysts giving the Buy signal at this juncture? Sell-side firms currently have a consensus recommendation of 3.30 on the shares. This is based on a 1 to 5 formula where 1 indicates a Strong Buy and 5 a Strong Sell. Analysts are projecting the stock to trade at 10.80 within the next 12-18 months.
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