Morning gaps are the bread and butter of short-term, mean reversion trading for a lot of active investors. And in watching the powerful snapback rallies in stocks like Walmart Stores (NYSE: WMT), which bounced by more than two and a half percent after we highlighted the stock’s morning gap in 7 Stocks You Need to Know for Wednesday, it is easy to see why.
So here are a few stocks that gapped down on the opening bell Thursday morning, remained under pressure over the course of Thursday’s session, and are set to open in or near short-term oversold territory when trading begins on Friday.
Starting with the biggest drop in the S&P 500 on Thursday is the big gap down in shares of Akamai Technologies (NASDAQ: AKAM).
AKAM had just rallied to new, short-term highs when sellers came off the sidelines to send the stock sharply lower on Thursday’s open. Gapping down by more than 6% at the start of trading, Akamai continued to sell-off over the course of the trading day, finishing off by more than 14%. The correction sends the stock to its lowest level since early February, and below an extended trading range that extends back more than two and a half months.
As such, it is no surprise to find that Akamai Technologies has earned a sizable, short-term, positive edge of just under 3% heading into trading on Friday.
Also gapping lower on Thursday and finishing the session short-term oversold above the 200-day moving average are shares of Celgene Corporation (NASDAQ: CELG).
Unlike AKAM, CELG shares had been moving lower in advance of the stock’s big drop on Thursday. Gapping down by more than three and a half percent on the day, Celegene continued lower over the course of the session, adding nearly another 3% to the stock’s decline.
Down three out of the last four trading days after Thursday’s pullback and trading at its lowest levels in a month and a half, Celgene is set to open well inside short-term, oversold territory, with a positive edge of one and a half percent.
There are few things that vex short-term traders more than the kind of move that happened in Varian Medical Systems (NYSE: VAR) on Thursday. The stock broke out above a two-week trading range on Wednesday, gaining more than 4% and sending VAR to its highest levels of the month. But on Thursday, the sellers were out in force, jamming VAR lower on the open by two and a half percent and continuing to sell the stock until it finished down more than 8%.
Despite this, VAR is not yet technically oversold, and could conceivably trade lower on Friday and still not reach oversold levels. Notwithstanding, the pullback in VAR has created a significant short-term edge of almost 2% as of Thursday’s close.
Click here to learn more about identifying and trading high probability stock gaps.
David Penn is Editor in Chief of TradingMarkets.com