During the recent trading sessions stock of Altisource Residential Corporation (NYSE:RESI) was gathering the crowd in the stock market. Analysts often use price and volume data to predict future stock performance. In the case of RESI, the chart has some interesting things to say about where the stock might be headed.
How has the stock performed recently?
Altisource Residential Corporation (NYSE:RESI) has been trading in a bearish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of RESI has decreased -8.09%. Shares are now up +18.98% over the past year, outperforming the broad market by 62.92% and underperformed a peer group of similar companies by -40%. After the latest session, which saw the stock close at a price of $12.16, RESI sits -22.35% below its 52-week high.
Of course, these surface-level price movements don’t tell us much about the direction that RESI may be headed in the future. Fortunately, there is way to use the speed and magnitude of these price changes to predict future performance, thanks to what are known as momentum indicators. As momentum slows, it might be a sign that a support or resistance level has been reached, and that a trend is about to reverse. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for RESI is 35.83%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 13.41%, tells a different story, and suggests that RESI currently trades in oversold territory.
What do the trading volumes reveal?
Analysts use volume trends to assess the level of conviction behind a stock’s price changes. When volumes suddenly increase above normal levels, it can be a sign that investors feel very strongly in one way or the other about the future direction of a stock, or may even have access to inside information. Altisource Residential Corporation (RESI) average trading volume of 271,815 during the past month is 55.83% below its average volume over the past year, indicating that investors have been less active than usual in the stock in recent times.
What do the analysts think?
RESI is currently undervalued by -20% relative to the average 1-year price target of $15.20 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.30, which implies that analysts are generally neutral in their outlook for RESI over the next year.
How risky is the stock?
When analyzing a stock’s price performance, it’s essential to take risk into account. Beta, which measures a stock’s volatility relative to the overall market, can be used to gauge the level of systematic risk associated with a particular stock.
Altisource Residential Corporation (NYSE:RESI) has a beta of 2.07, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. RESI therefore has a above average level of market risk. During the past couple of weeks, RESI average daily volatility was 22.23%, which is 3.67 percentage points lower than the average volatility over the past 100 days.