4 Oversold Stocks for Traders: TG, FFH, CVCO, BMRN
When markets move higher, they tend to take stocks with them. But that doesn’t mean that there aren’t a number of opportunities in stocks that are pulling back.
True enough, there are fewer stocks in pullback mode when the markets soar higher–as they did on Wednesday. But it is also true that pullbacks tend to follow strong moves higher–whether or not those strong moves end up being enduring ones. And these pullbacks are what swing traders need to be on the lookout for in order to spot the best opportunities for trades.
It is also important for traders to keep the context in mind. There were a number of high Short Term PowerRatings stocks in our list as of this morning that were trading below their 200-day moving averages. But traders need to be careful about being tempted into buying these stocks.
Even though they have the sort of high Short Term PowerRatings that we encourage traders to look for, the fact that the broader markets are still under pressure and still trading below their 200-day moving averages means that traders should stick with the higher probability trades. And those higher probability trades are to be found in those high Short Term PowerRatings stocks that are trading ABOVE their 200-day moving averages.
The stocks in today’s report are not as oversold as we would like. This too is a product of recent market strength, the tide that lifts all boats. That said, the fact that many of these stocks have relatively high Short Term PowerRatings even as their 2-period RSI values remain in the low double-digits.
Going forward, this suggests an interesting opportunity for the Short Term PowerRatings of these stocks to be upgraded in the coming days insofar as any further weakness–such as we anticipate on Thursday after Wednesday’s rally–will likely result in even lower 2-period RSI values.
As a note, we consider stocks to be oversold when their 2-period RSIs drop below 10, and extremely oversold when their RSIs drop below 2. All four of these stocks, then, are moving deeper into oversold territory and could become even better opportunities for traders in the days to come.
One other note. This morning in our Daily Battle Plan for Stocks service, we announced seven exits: six profitable, one mixed depending on entry level. Reviewing these successful trades, it became all the more clear to us how key it is for traders to look to buy stocks at the lowest possible levels. While there is a temptation to want to get into a stock at all costs, our experience and historical testing both indicate that the lower you are able to buy a stock as it pulls back, the better your chances not just for making a profit, but for making a sizable profit.
True, waiting for deeper pullbacks can mean missing some trades in stocks that do not pullback quite deep enough. But the stocks that do provide that extra bit of intraday weakness are very often worth waiting for.
Tredegar
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TG |
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PowerRating). Short Term PowerRating 9. RSI(2): 10.50
Fairfax Financial
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FFH |
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PowerRating). Short Term PowerRating 8. RSI(2): 10.61
Cavco Industries
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CVCO |
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PowerRating). Short Term PowerRating 8. RSI(2): 12.89
Biomarin Pharmaceuticals
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BMRN |
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PowerRating). Short Term PowerRating 8. RSI(2): 4.12
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David Penn is Senior Editor at TradingMarkets.com.