Legendary investor Warren Buffett advises to be fearful when others are greedy, and be greedy when others are fearful. One way we can try to measure the level of fear in a given stock is through a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In trading on Tuesday, shares of Mallinckrodt plc (Symbol: MNK) entered into oversold territory, hitting an RSI reading of 24.7, after changing hands as low as $37.67 per share. By comparison, the current RSI reading of the SP 500 ETF ( SPY ) is 66.0. A bullish investor could look at MNK’s 24.7 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. The chart below shows the one year performance of MNK shares:
Looking at the chart above, MNK’s low point in its 52 week range is $37.67 per share, with $85.83 as the 52 week high point – that compares with a last trade of $38.94.
According to the ETF Finder at ETF Channel, MNK makes up 4.28% of the SPDR SP Pharmaceuticals ETF (Symbol: XPH) which is trading lower by about 0.8% on the day Tuesday.