Sunoco LP (SUN) is losing -9.91% in 4 weeks, so a trend reversal could be imminent

Sunoco LP (SUN) has been in a downward spiral of late with significant selling pressure. After falling 9.9% over the past four weeks, the stock appears well-positioned for a turnaround as it is now in oversold territory and there is strong consensus among Wall Street analysts that the company is doing better will show profits than they had previously predicted.

Guide to Identifying Oversold Stocks

We use the Relative Strength Index (RSI), one of the most commonly used technical indicators, to determine whether a stock is oversold. This is a momentum oscillator that measures the speed and change of price movements.

The RSI fluctuates between zero and 100. Typically, a stock is considered oversold when its RSI value falls below 30.

Technically, every stock fluctuates between overbought and oversold, regardless of the quality of its fundamentals. And the beauty of RSI is that it helps you quickly and easily check if a stock's price is reaching a reversal point.

So if a stock has fallen too far below its fair value simply because of unwarranted selling pressure, investors may look for ways to enter the stock to benefit from the inevitable recovery.

However, like any investment tool, RSI has its limitations and should not be used alone to make an investment decision.

Why SUN is facing a turnaround

The RSI reading of 25.16 for SUN is an indication that the heavy selling may be starting to exhaust, allowing the stock to bounce back to the old supply and demand balance.

The RSI value is not the only factor that indicates a possible short-term trend reversal in the stock. On the fundamental side, there was a strong consensus among sell-side analysts covering the stock on raising earnings estimates for the current year. Over the past 30 days, the consensus EPS estimate for SUN has increased 1.9%. And an uptick in earnings estimate revisions typically results in a short-term increase in price.

The story goes on

Additionally, SUN currently has a Zacks Rank #2 (Buy), which means it ranks in the top 20% of more than 4,000 stocks we evaluate based on trends in earnings estimate revisions and EPS surprises. This is a more conclusive indication of the stock's possible short-term trend reversal. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here >>>>

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