3 Top Oversold Stocks: DCP, MYGN, and RDEN

More and more traders are coming around to the idea that it
is better to buy stocks that are GOING to go up than it is to buy stocks that
have ALREADY gone up. This idea of buying weakness — and then selling strength
— is
at the core of the TradingMarkets approach to trading.


Learn more about the TradingMarkets approach to trading by
registering for our free course: the TradingMarkets Path to Professional
Trading – Level One.

So how do traders find those stocks that are GOING to
advance rather than those that have already done so? One way is to look for
oversold stocks, stocks whose holders have become too fearful, too pessimistic.
And one of the best ways to spot oversold stocks is to use a technical indicator
known as the Relative Strength Index

The Relative Strength Index has been around for awhile.
But our research has discovered that the way that most traders use the Relative
Strength Index, or RSI, is probably not the best way of using it. As Ashton
Dorkins and Larry Connors revealed to readers earlier this year, by “shortening
your stroke” and using a 2-period RSI rather than the traditional 14-period
version, traders can gain a quantifiable, short-term edge.


Click here to read the report on the 2-period Relative
Strength Index from Ashton Dorkins and Larry Connors.

Moreover, Dorkins and Connors discovered that the edge
increased the lower the 2-period RSI went. As they wrote:

It is important to understand that the performance improved
dramatically each step of the way. The average returns of stocks with a 2-period
RSI reading below 2 were much greater than those with a 2-period RSI reading
below 5, etc.

With this in mind, let’s look at some of the highest rated,
PowerRatings (for Traders) stocks among those that are above their 200-day
moving average, but feature a 2-period RSI that is below 2. Historically,
stocks in this condition have shown positive returns in one-day, two-day and
one-week timeframes.

First up is Dynacorp International, Inc.
(
DCP |
Quote |
Chart |
News |
PowerRating)
. Dynacorp
has a PowerRatings (for Traders) rating of 9 and is in the business of providing
specialized services to civilian and military government agencies. The stock
peaked just north of $24 per share in early November.

Myriad Genetics, Inc.
(
MYGN |
Quote |
Chart |
News |
PowerRating)
has a PowerRatings (for
Traders) rating of 9. Myriad Genetics is a biopharmaceutical company with its
strongest drug discovery and development initiatives in the areas of Alzheimer’s
disease, cancer and anti-virals. The stock traded as high as $59 in early
October.

Trading as high as $28 in the first half of October, shares
of Elizabeth Arden, Inc.
(
RDEN |
Quote |
Chart |
News |
PowerRating)
have earned a PowerRatings (for Traders) rating
of 9. Elizabeth Arden makes and distributes high-end beauty products including
color-coordinated makeup sets and a variety of luxury fragrances, including
“celebrity” fragrances.

3 Top Oversold Stocks Recap: DCP, MYGN, and RDEN

Dynacorp International, Inc. (DCP). PowerRatings
(for Traders) rating: 9

Myriad Genetics, Inc. (MYGN). PowerRatings (for
Traders) rating: 9.

Elizabeth Arden (RDEN). PowerRatings (for Traders)
rating: 9.

David Penn is Senior Editor at TradingMarkets.com