Active Investors, Oversold Markets and Auto Stocks

One of the interesting things about using an objective, data-driven approach to find the stocks that have the biggest quantified edges is that the quest can often take you into parts of the market that you might not have expected to be foraging in. Most recently, the search has led me to the word of auto makers and auto parts manufacturers, a number of which have begun to experience significant profit-taking.

Let’s start with a lesser known automaker, Tata Motors. Shares of Tata Motors Ltd Ads (NYSE: TTM) rallied to new, 52-week highs just last week, and traders have been in profit-taking mode ever since. The stock has fallen for three days in a row to finish in technically oversold territory ahead of trading on Wednesday.

The selling in TTM has resulted in a two-point ratings upgrade in the stock, taking TTM from a neutral, 6 out of 10, to a “consider buying” 8 out of 10 midway through Tuesday’s session. TTM also has a positive edge in the short-term of more than one and a half percent.

Note that the last time shares of TTM pulled back into short-term oversold territory was during the first full week of trading in March. Then, a three-day sell-off was met by buyers who ended up bidding Tata Motors higher for six out of the next seven trading days, gaining more than 10%.

Moving lower from far less lofty levels ahead of Wednesday’s open are shares of General Motors (NYSE: GM).

General Motors stock climbed back into bull market territory at the beginning of February, and rallied to a new, 6-month high by the middle of that month. Since then, profit-taking has brought the stock lower in two stages: an initial sell-off lasting into March, culminating in a three-day sell-off (and oversold finish just below the 200-day moving average), and the current pullback, now in its fourth day.

That initial pullback ended with a significant rally during which General Motors closed higher for five out of six days for a gain of 7%. Turning to the current sell-off and heading into Wednesday’s trading, shares of General Motors slid by another 1% to close in technically oversold territory ABOVE the 200-day moving average for the first time in several months.

The General Motors pullback has earned the stock a short-term, positive edge of more than 1%.

An interesting sidebar is the number of auto parts manufacturer stocks that have also begun to sell-off and trade toward levels where buyers, historically speaking, have tended to be more aggressive than sellers. These include Borg Warner Inc. (NYSE: BWA).

Borg Warner has closed lower for three days in a row to finish technically oversold for the first time in two weeks. BWA shares earned a ratings upgrade to 7 out of 10, and have a positive, short-term edge of more than three-quarters of a percent. Another stock for short-term traders and active investors to keep an eye on is TRW Automotive Holdings Corp (NYSE: TRW).

TRW Automotive will take a positive edge of nearly 1% into trading on Wednesday. The stock, which has been trading in bull market territory for just over a month, dropped by more than three and a half percent to finish just outside of technically oversold territory.

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David Penn is Editor in Chief of