The financial sector has been on a roll lately, with several stocks delivering impressive gains. However, for momentum investors, it’s crucial to be aware of potential overbought conditions. The Relative Strength Index (RSI), a widely used momentum indicator, can help identify when a stock’s price gains may be unsustainable. A reading above 70 on the RSI typically signals an overbought condition, suggesting a potential pullback.
As of October 24, 2024, three financial stocks are displaying high RSI values, raising red flags for momentum investors:
1. National Bank Holdings Corp (NBHC):
National Bank Holdings Corp reported better-than-expected quarterly earnings on October 22, boosting its stock price. CEO Tim Laney highlighted the company’s strong balance sheet, capital position, and earnings growth, leading to a 3.6% increase in the quarterly dividend. The stock has gained around 8% over the past month, reaching a 52-week high of $46.52. However, its current RSI value of 72.16 indicates potential overbought conditions.
2. East West Bancorp Inc (EWBC):
East West Bancorp also delivered strong third-quarter financial results on October 22, reporting balanced growth in consumer and business banking deposits. Chairman and CEO Dominic Ng emphasized the company’s diversified loan portfolio and the acceleration of net interest income and fee income. The stock has climbed around 18% over the past month, hitting a 52-week high of $98.95. Its RSI value of 78.02 further points to potential overbought conditions.
3. Northern Trust Corp (NTRS):
Northern Trust Corp reported better-than-expected quarterly financial results on October 23. The stock has experienced a significant surge of around 12% over the past month, reaching a 52-week high of $104.25. However, with an RSI value of 86.94, it is clearly in overbought territory.
While the strong earnings reports and positive growth trends are encouraging for these companies, momentum investors should proceed with caution. The high RSI values suggest these stocks might be due for a correction. Investors should closely monitor the price action and consider incorporating other technical indicators into their decision-making process.
