Not That Simple…..
Why are the majority of professional traders not in favor of a strategy of
buying “oversold” stocks and selling “overbought” equities? Because it is not
that simple and a good way to potentially lose a great deal of hard-earned
money. The equation is more complex than that, and extreme conditions have a way
of becoming more so. The trick is to take a look at the bigger picture.
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09:28:15
While early indications are for a positive open, look for additional weakness
in the battered telecommunications sector ($XTC.X).
Nortel (NT)
has adjusted its Q1 outlook downward and Verizon (VZ)
has announced it will absorb 2.5 billion dollars of “goodwill” charges and other
investments, both of which could pressure the already weakened issues in this
area of the market. NT closed Monday at 3.58 while VZ closed at 44.21.
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On Tuesday, both Nortel
(
NT |
Quote |
Chart |
News |
PowerRating) and Verizon
(
VZ |
Quote |
Chart |
News |
PowerRating) came out with bearish
news, and the sector in addition to both of these stocks had been battered in
the last couple of weeks.
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Since markets often test and retest prior lows and highs, the
news will likely provide the fuel to head back toward the February low.
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Traders who paid attention were rewarded, as the stock drops
nearly 2 points intraday. Ignore the pundits crying “oversold” and “overbought”.
While they are both valid conditions to be aware of, it is just not that simple.
Until tomorrow,
Duke