Trading By the Numbers: Overbought Oils and Bargains in Retail
Looking at the biggest edges in the S&P 500, to the upside and to the downside, it is clear that the market is producing bargains when it comes to retail, while oil and energy stocks, in the short term, are likely due for a serious round of profit-taking.
One example of a retail stock that is earning significant edges ahead of trading on Wednesday is Autonation Inc. (AN).
Shares of Autonation pulled back by more than 2% in Tuesday’s session, closing lower for a fourth day in a row (and down seven out of the past eight). The selling in shares of Autonation has resulted in four consecutive closes in oversold territory, and a stock that is only barely trading above its 200-day moving average.
The last time AN was trading at these levels was near the market’s most recent major low at the beginning of October. Then, five consecutive down closes and a finish in oversold territory (below the 200-day, no less) were the final stages of a sell-off that anticipated a move of more than 25% over the next 30 days.
But if retail stocks like Autonation – and rival Sonic Automotive (SAH), which has finished lower for four days in a row and has an edge that is just over half as much as Autonation’s – represent potential bargains in the market, oil and energy stocks like Nabors Industries (NBR) on the other hand, are considerably more overbought.
Trading in bear market territory, since early August, shares of NBR have finished higher for five days in a row, with the stock’s last two closes in overbought territory below the 200-day.
NBR was last trading at overbought levels a little over a week ago. Then, a pair of consecutive closes in overbought territory anticipated a two-day sell-off of more than 10%.
Other overbought oil and energy companies with similarly significant negative edges include Marathon Oil Corporation (MRO) and Alpha Natural Resources (ANR).
The stocks in today’s report were drawn from the data and research available through The Machine. To find out more, click here.
David Penn is Editor in Chief of TradingMarkets.com