5 Oversold Stocks for Traders
With the markets moving toward potential resistance, short term traders will be looking for pullbacks to buy in the coming days.
It’s a trading truism that markets often fail on their initial attempts to break through to new higher levels. Or, if markets to break through to higher levels on the first effort, they often pull back shortly thereafter as those who had been betting simply on “crossing the finish line” of a new level decide to take profits.
What is happening to individual stocks when markets make tests of resistance? Many of those stocks will be pulling back as well. Even they are not themselves testing resistance, many stocks tend to move in sympathy with the larger, more powerful “tides” of the broader market.
Why is this important to short term traders? Traders sometimes have a bad habit of taking the broader market too literally, feeling that if the broader market has failed at resistance, there is little else for the trader to do until the market shows sufficient strength to breakthrough for good. For traders who use our approach to short term speculation, however, we see pullbacks in the market as a “sign” that it is time to see which stocks are also pulling back. And while pullbacks in markets trading below their 200-day moving averages tend to be bearish, there are likely plenty of stocks that are also in pull back mode, but are doing so above the 200-day moving average.
These are the pullbacks we, as short term stock traders, live for.
So the next time you see or anticipate market weakness, do not become too preoccupied with what the broader market is doing. When the broader market–the Dow Jones Industrials, the S&P 500, the Nasdaq–starts moving lower, switch your focus to individual stocks–especially high Short Term PowerRatings stocks–and see if they too are in pullback mode. If so, the markets’ misfortune may have just alerted you to a great opportunity for a short term stock trade.
Speaking of great opportunities for short term stock trades, all of the stocks in today’s report have Short Term PowerRatings of 9. This means that all five belong to that class of stocks which, according to our research, has outperformed the average stock by a margin of more than 13 to 1 over the next five days.
Note also the 2-period Relative Strength Index (RSI) values for each stock. Our modified RSI helps separate truly oversold stocks from those that may not be as oversold as they appear. We consider a 2-period RSI of less than 10 to be an indication of a significantly oversold market.
T-3 Energy Services
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TTES |
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PowerRating). Short Term PowerRating 9. RSI(2): 6.10
Permian Basin Royalty Trust
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PBT |
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PowerRating). Short Term PowerRating 9. RSI92): 2.09
DRIL-QUIP
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DRQ |
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PowerRating). Short Term PowerRating 9. RSI(2): 16.53
Captone Turbine
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CPST |
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PowerRating). Short Term PowerRating 9. RSI(2): 15.82
Basic Energy Services
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BAS |
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PowerRating). Short Term PowerRating 9. RSI(2): 10.99
Does your stock trading need a tune-up? Read our special, Free Report, “5 Secrets to Short Term Stock Trading Success” for a refresher course on not just why to buy low and sell high, but specifically how you can use intraday weakness in the market to do so. Click here to get your copy of “5 Secrets to Short Term Stock Trading Success” or call us today at 888-484-8220.
David Penn is Senior Editor at TradingMarkets.com.