Textron (TXT) is losing -11.5% in 4 weeks, so a trend reversal could be imminent

Textron (TXT) has been under pressure recently due to excessive selling pressure. Although the stock has lost 11.5% in the last four weeks, there is light at the end of the tunnel as it is now in oversold territory and Wall Street analysts expect the company to post better earnings than they previously forecast had.

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 get into the stock to take advantage of the inevitable recovery.

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

Here's why TXT could see a turnaround

The heavy selling in TXT stock appears to be exhausting, as shown by the RSI reading of 25.83. Therefore, the trend of the stock may soon reverse and reach the old balance of supply and demand.

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 TXT has increased 0.4%. And an uptick in earnings estimate revisions typically results in a short-term increase in price.

Additionally, TXT 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 >>>>

Want the latest recommendations from Zacks Investment Research? Today you can download the 7 best stocks for the next 30 days. Click here to get this free report

Textron Inc. (TXT): Free Stock Analysis Report

The story goes on

To read this article on Zacks.com click here.

Zacks Investment Research