In the dynamic world of stock trading, understanding momentum is crucial. One popular tool for gauging momentum is the Relative Strength Index (RSI). This indicator compares a stock’s upward price movement to its downward movement, offering insights into potential short-term performance. When the RSI exceeds 70, it generally suggests a stock is overbought, potentially hinting at an upcoming price correction.
As of October 3, 2024, two communication services stocks are displaying overbought signals, prompting caution among investors who value momentum in their strategies.
Madison Square Garden Sports Corp (MSG):
MSG’s stock has seen a positive run recently, fueled by strong second-quarter financial results. The company, led by James L. Dolan, reported record financial results in fiscal 2024, driven by robust demand for the Knicks and the Rangers. This bullish sentiment has propelled the stock’s price, reaching a 52-week high of $213.26. However, the RSI currently stands at 72.41, indicating potential overbought conditions.Sohu.com Ltd – ADR (SOHU):
Sohu.com has also enjoyed a surge in its stock price, boosted by a 13% year-over-year revenue growth in the second quarter of 2024. Despite a projected decline in brand advertising revenue in the third quarter, the company’s stock has gained around 8% over the past month, reaching a 52-week high of $16.65. However, its RSI sits at 73.12, signifying a potential overbought state.While both MSG and SOHU have enjoyed recent success, the overbought signals suggest that investors might want to exercise caution. The overbought condition suggests the stocks may be due for a price correction, potentially creating a temporary dip in their upward trajectory. Investors should carefully consider these signals when making their trading decisions.
