Most stocks saw gains on Wednesday with 57% of NYSE-listed stocks and 64% of NASDAQ-listed stocks rising. Coal mining company Alliance Resource Partners L.P. (NYSE: ARLP) was among the losers, shedding about 4.5% on the day. The stock ended the day deeply oversold on a number of indicators. The chart below is from TradingMarkets.com and shows three important indicators at a glance. ARLP is oversold on ConnorsRSI, Bollinger Bands® (%b) and the 2-period RSI.
ARLP has a ConnorsRSI reading below 1. ConnorsRSI readings below 20 are usually considered oversold. Extremely low readings are relatively rare. This indicator rarely falls below 5, on average, just once or twice a year. Testing shows we should expect a stock to have a ConnorsRSI reading below 5 on just 0.63% of all trading days. Readings below 1 are even rarer. This test was completed on approximately 6,000 highly liquid stocks from January 2, 2001 through February 28, 2014 and the results are presented in An Introduction to ConnorsRSI, 2nd Edition, which can be downloaded for free here.
On average, after the ConnorsRSI reading on a stock falls below 5 we have seen a gain of 2.15% over the next five days.
The 2-period RSI is also below 1, a confirmation that the stock is deeply oversold on a short-term basis. In Short Term Trading Strategies That Work, we demonstrated that buying when the 2-period RSI is below 20 has been a profitable strategy. ARLP should be considered a potential buy.
Now let’s look at the most overbought and oversold stocks (according to ConnorsRSI) heading into trading for September 25, 2014. ConnorsRSI is a proprietary and quantified momentum oscillator developed by Connors Research that indicates the level to which a security is overbought (high values) or oversold (low values).
ARLP (Alliance Resource Partners L.P.) is the most oversold stock with a ConnorsRSI reading of 0.26.
HYLD (Peritus High Yield ETF) is the most oversold non-leveraged ETF with a ConnorsRSI reading of 5.13.
AGQ (Proshares Ultra Silver) is the most oversold leveraged ETF with a ConnorsRSI reading of 11.14.
VRTX (Vertex Pharmaceuticals) is the most overbought stock with a ConnorsRSI reading of 98.96.
THD (iShares MSCI Thailand) is the most overbought ETF with a ConnorsRSI reading of 88.84.
TradingMarkets Lists provide users pre-populated lists of stocks and ETFs identifying symbols with overbought and oversold ConnorsRSI and Bollinger Bands® readings. The Screener Lists are powered by The TradingMarkets Screener.
All data is as of the end of day on 9/24/2014.