LLegendary investor Warren Buffett advises to be fearful when others are greedy and to be greedy when others are afraid. One way we can try to measure the level of fear of a given stock is by using a technical analysis indicator called a Relative Strength Index, or RSI, which measures momentum on a scale from zero to 100. A stock is considered oversold if the RSI reading falls below 30.
Shares of Bright Horizons Family Solutions, Inc (ticker: BFAM) entered oversold territory on Friday, reaching an RSI of 27.2, after changing hands to as low as $ 116.04 a share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 58.3. A bullish investor might take BFAM’s RSI 27.2 reading today as a sign that the recent sell-off is running out and start looking for entry point opportunities on the long side. The graph below shows the performance over one year of the BFAM share:
Looking at the chart above, BFAM’s low point in its 52 week range is $ 116.04 per share, with $ 182.50 as a 52 week high, compared with a last trade of 116.88 $.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.