Buying the Selling in the Nasdaq Biotechs
What’s down on an up day?
And not just any “up day”, but an “up day” that saw the Nasdaq rally by more than 3% to close at the highest level since the beginning of the week.
Now there are plenty of Nasdaq stocks trading lower heading into trading on Wednesday. ^RIMM^ is one. Shares of RIMM were down more than 2%, finishing lower for a third day in a row.
But because RIMM continues to languish below its 200-day moving average, the stock is just not suitable for most short-term trading. So rather than look for just any stock that is down and trading in or near oversold territory as of Tuesday’s close, the real goal is to find stocks that are pulling back, but doing so in bull market territory, above the 200-day moving average.
The 200-day moving average filter potentially eliminates a wide variety of stocks from consideration as potential trading opportunities. But in exchange, traders and investors are typically dealing with stocks that are in longer-term bull markets and more likely to respond both positively and strongly after short-term sell-offs.
Our focus thus limited, the few Nasdaq stocks that are pulling back to oversold levels above the 200-day moving average include stocks like ^INHX^, a biotechnology firm that has finished lower for six out of the past seven trading days. Even more oversold are shares of fellow health care sector stock ^ABMD^. Shares of ABMD have closed lower for seven days in a row, the past three in oversold territory.
Note that both INHX and ABMD have earned some of our highest, short-term “consider buying” ratings out of all the stocks in our database.
Also moving lower in bull market territory ahead of Wednesday’s trading are shares of ^SAFM^. Although the stock has a neutral rating as of end of trading on Tuesday, SAFM finished lower by more than 3%, closing lower for a second day in a row above the 200-day. Any significant selling in SAFM over the next day or two will almost certainly take SAFM into oversold territory.
All of the stocks in today’s report were available from research and data available through PowerRatings. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com