DataTrader: Heading for the Exits in Express Scripts
After rallying for more than 15% over the past three days, shares of Express Scripts (ESRX) sold off by 2%. Time to buy? Or time to sell?
Express Scripts has been trading in bear market territory since late July. But the stock most recent bounce is only the second time ESRX has been technically overbought. The last time came as the stock rallied off its lowest levels of the year in early October. More on that in a moment.
Heading into trading on Tuesday, ESRX is one of the lowest rated stocks in our database, earning a 3 out of 10. This means that the stock has advanced to a level at which, historically speaking, sellers have tended to enter or re-enter the market to send the stock lower. For traders looking to add Express Scripts to their portfolios, the good news is that the stock may be available at lower levels in the next few days.
For traders looking to take the opposite side of that trade, there are a few encouraging notes as well. For one, ESRX is more overbought than oversold heading into Tuesday’s trading, and despite dropping by 2% on Monday, ESRX is still trading well above its 5-day moving average (the 5-day moving average being a typical exit signal for many short term traders).
For two, ratings of 3 over the past few months have been timely signals anticipating weakness in the market for ESRX. The stock earned a rating of 3 in mid-October and was trading lower by more than 5% six days later. Previous low ratings in August led to similar sell-offs: down by 5% in three days in mid-August, off by more than 3% in three days at the end of August.
As always, there’s no telling if ESRX will respond here in late autumn as is it did in late summer. But the track record for this stock – like all stocks that become overbought in bear market territory – is clear. Traders should position themselves accordingly.
Quantified data and research on stocks like ESRX is available each evening after the market close. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com