Suncor Energy (SU) Shows Signs of Recovery After Recent Decline

Suncor Energy (SU - Free Report) has faced a challenging period recently, suffering from intense selling pressure. Over the past four weeks, the stock has dropped by 12.5%. However, there are positive signals suggesting a potential rebound. The stock is currently deemed oversold, and analysts on Wall Street are anticipating better earnings reports than previously expected.

Understanding Oversold Stocks

To gauge whether a stock is oversold, the Relative Strength Index (RSI) is commonly applied. This technical indicator serves as a momentum oscillator, evaluating the speed and change of price movements.

RSI values fluctuate between zero and 100. Typically, a stock is classified as oversold when its RSI falls below 30.

Every stock experiences cycles of being overbought and oversold, irrespective of its underlying fundamentals. The utility of RSI lies in its ability to quickly identify when a stock's price may be nearing a reversal point.

If a stock is perceived to be undervalued due to excessive selling, investors may see this as an opportunity to buy before a rebound happens.

It is important to note that, like all investing tools, RSI should not be the sole factor in making investment decisions.

Reasons for an Anticipated Recovery for Suncor Energy

The current RSI reading for Suncor Energy is 28.73, which indicates that the selling pressure may be tapering off. This could pave the way for a price increase as the stock seeks to return to a balanced state of supply and demand.

Beyond the RSI reading, there are fundamental indicators pointing to a potential turnaround. Recently, there has been a robust agreement among analysts covering the stock to increase earnings estimates for this year. The consensus earnings per share (EPS) estimate for SU has risen by 3.3% in the past month. Typically, when earnings estimates begin to trend upward, it correlates with an increase in stock prices in the near future.

Suncor Energy also holds a Zacks Rank of #2 (Buy), positioning it within the top 20% of over 4,000 stocks assessed based on earnings estimate revisions and EPS surprises. This ranking serves as a strong indication of the stock's likelihood of recovering in the near term.

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