5 Fundamentally Solid Stocks That Are Oversold and Poised for Impulsive Rally (With Bonus Sell List)

The sharp decline in the U.S. stock market last week has pushed risk sentiment to levels last seen on January 13th. At that time, stocks completed a correction, and the S&P 500 rebounded 5% within a week. While it's uncertain if the current round of sell-offs has ended, many fundamentally solid stocks have reached extremely oversold levels, positioning them for a potential short-term dead cat bounce. These stocks could serve as a hedge against further downside risk and may significantly outperform during a market recovery—whether driven by technical or fundamental factors. We've also included a list of stocks showing warning signs as a bonus at the end of the article, making them potential candidates for short positions.

Amazon (AMZN)

Amazon has dropped to the December 4th price level, a critical resistance point. Just last month, shares hovered around $216 before bouncing back. The stock has now corrected nearly 10% since its latest earnings, driven by a combination of disappointing guidance and valuation concerns. Despite the negative sentiment, the RSI has fallen to 16.8, a level last seen on August 5th, when a significant sell-off also coincided with a sharp oversold bounce to new highs. Given these factors, Amazon is in our buy-the-dip list, poised for a potential rebound in the short term, even if broader market conditions remain weak.

The Trade Desk (TTD)

The Trade Desk is another stock facing extreme pessimism. After a 40% drop over two weeks, driven by Q4 revenue and guidance misses, investor sentiment is at a low point. However, as a key supplier to Netflix and an emerging player in AI-powered advertising, The Trade Desk's fundamentals remain solid. Its RSI has now fallen to 10.2, last seen in November 2022, when the stock rallied 30% in just one week. The trading volume has also been down for five consecutive days, indicating reduced selling pressure. Given the low RSI and solid fundamentals, we expect a sharp bounce soon.

Walmart (WMT)

Walmart faced a significant 2-day sell-off after issuing weaker-than-expected guidance, citing tariff risks and a conservative outlook. Despite this, we view it as another buy-the-dip opportunity. The stock had previously surged as investors viewed it as a safe haven asset with strong pricing power. After the nearly 9% drop from pre-earnings levels, more funds are likely to flow into Walmart as a hedge against uncertainty. The RSI has fallen to 20, not extremely oversold but the lowest level in 10 months. If it continues to decline, more investors may step in to buy, given the company's robust consumer spending and self-reliance.

Caterpillar (CAT)

Caterpillar's stock has been negatively impacted by concerns over the U.S. economic outlook. The stock has retreated to September levels, but global manufacturing is still growing, as evidenced by a rise in global manufacturing PMI to 51.6 in February. Caterpillar remains well-positioned to mitigate tariff risks due to its status as a net exporter. The stock has an RSI of 13, not its lowest level historically but still showing oversold conditions. As economic prospects improve, Caterpillar, as a key player in global manufacturing, should benefit from a recovery in demand.

Block (XYZ)

Block saw its shares plunge 18% on its worst trading day after Q4 earnings missed expectations. However, the company's core business remains strong, with solid payment volume and EBITDA results. Despite missing revenue and earnings targets, the company reiterated its 2025 guidance. The RSI has dropped to 7.2, an extremely oversold level reminiscent of September 25, 2023. While the rebound may not be as swift or as large as The Trade Desk's, the stock is worth considering for a buy on the dip due to its strong fundamentals, though the bounce may take longer to materialize.

Bonus: Sell List (with Brief Comments)

Alibaba: RSI at 94, rally momentum fading; good news already priced in, hedge funds likely to cash out.

PDD: Faces Trump's tariff risks; rally driven by optimism around China AI but lacks substantial AI features.

Broadcom: MA (3, 7, 10) turning downward; lower highs forming on the chart.

Tesla: Musk's heavy political involvement raises concerns; AI and robotaxi take time, earnings warning possible, limited business benefits under Trump due to conflict-of-interest risks.

Uber: MA (3) at an inflection point; lacks momentum to surpass October's highs and may face further struggles.