Westpac Share Price is Getting Oversold. Buy the Dip?

Brisbane, Queensland, Australia - 27th November 2019 : View of the Westpac bank entrance hall in Queenstreet with many ATM's inside

The Westpac share price has been under intense pressure in the past few months. The WPC stock is trading at A$20, which is the lowest level it has been since February 2021. It has crashed by over 20% from its highest level in 2021.

Westpac has lagged

The Westpac share price has underperformed other bank stocks. For example, while it is trading at its lowest level in 52 weeks, other banks have done well. In Australia, the ANZ share price is just 6% below the highest level this year. Similarly, the Commonwealth Bank share price has dropped by just 14% from its highest level.

Globally, Westpac has lagged other bank shares like Lloyds Bank, Barclays, Goldman Sachs, and HSBC. As a result, it is one of the worst-performing stocks in the ASX 200 index.

There are several reasons why the Westpac share price has lagged. First, the company has been in the regulators’ crosshairs in the past few years. For example, it was forced to pay over A$1 billion because of weak anti-money laundering (AML) issues. The company is also facing an underpayment probe by the Fair Work Ombudsman.

Second, analysts have continually slashed their ratings for the bank. For example, recently, analysts at Zacks slashed their rating from “hold” to “strong sell”. Similarly, Goldman Sachs slashed its rating from “buy” to “hold” while Credit Suisse slashed the rating from “outperform” to “neutral.”

Still, there is a likelihood that the Westpac share price will keep rising later this year. Besides, the Australian economy is doing well and there is a likelihood that the RBA will deliver a hawkish statement next week.

Westpac share price forecast

The weekly chart shows that the WPC share price has been under intense pressure lately. Indeed, it has dropped in the past three straight weeks. A closer look shows that the stock has moved below the 25-day and 50-day moving averages. Indeed, the two averages are close to a bearish crossover while the Relative Strength Index (RSI) has moved to the oversold level. 

Therefore, there is a likelihood that the Westpac share price will continue with the downward trend in the next few weeks. This will see it drop to the key support at $18. This view will be invalidated if it rises above $22.