With stocks finishing the first quarter in bullish style in the S&P 500 and Dow industrials, the Nasdaq actually edged lower. This is interesting insofar as the Nasdaq had been the stronger of the three major averages over the past several weeks. And weakness here could anticipate broader profit-taking once the second quarter begins Monday morning.
Pulling back for a fourth day in a row on Friday, shares of Staples Inc. (NASDAQ: SPLS) continued to retreat from their recent rally to multi-month highs. The stock is short-term oversold for the first time since climbing back into bull market territory in mid-February, and has earned a short-term edge of just over 1%. Staples rating of 7 out of 10 puts the stock at the upper end of our neutral range.
Just a few weeks ago, profit-taking in the wake of new, 6-month highs in Sigma-Aldrich (NASDAQ: SIAL) took the stock lower for three days in a row and into short-term oversold territory. Shares of SIAL climbed higher for the following three days, gaining over 3% and finishing at new, two-week highs.
Traders will be looking to see whether the stock, which has again pulled back for three sessions in a row, will make a similar snapback rally over the next few days or if more selling is required to create the kind of oversold extremes that historically drawn buyers off the sidelines.
And with a modest edge of a third of a percent and neutral ratings, it is likely that shares of SIAL will need more than Friday’s breakeven trade before becoming truly an attractive target for short-term traders.
Down four in a row and trading inside technically oversold territory are shares of Yahoo! (NASDAQ: YHOO). The stock edged back above its 200-day moving average a few weeks ago, and is making its first significant pullback since then. Shares of Yahoo have earned a neutral rating ahead of trading on Monday, and have a positive edge in the short-term of just under a third of a percent.
If SIAL does not resume its pullback, then a stock like Paychex (NASDAQ: PAYX) that is already short-term oversold may be more worth paying attention to. Shares of PAYX, which have been trading in bull market territory since the beginning of the year, have closed lower for four days in a row heading into Monday’s session. This selling has earned PAYX a short-term positive edge of more than 1%, and 6 out of 10 ratings.
The updated, second edition of How Markets Really Work: A Quantitative Guide to Stock Market Behavior by Larry Connors and Cesar Alvarez is now available. Click here to learn more about what’s in the new edition and how to get your copy today.
David Penn is Editor in chief of TradingMarkets.com