Domino’s Pizza, Drug Stock Pullbacks, and The Chemical Brothers
Roll Me Over Romeo!
Traders for whom trading stock gaps is a key element of their active investing will have another opportunity to ply their trade as shares of Domino’s Pizza (NYSE: DPZ) plunged more than eight and a half percent in Thursday’s session.
The stock, which was trading at new, 52-week highs, as recently as Monday, is now at new, two-week lows and trading short-term oversold for the first time since a five-day sell-off in the first half of February.
The gap down and continued selling intraday has earned the stock a positive, short-term edge of more than 2%. And with a two-point ratings upgrade earned midway through Thursday’s session, shares of Domino’s Pizza are on track to open Friday morning with “consider buying” ratings of 8 out of 10.
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Amgen, Lilly Trade Lower
A handful of blue chip, drug stocks have pulled back toward levels where traders, historically and statistically speaking, have been more inclined to buy than sell in the short-term. Among these stocks are Amgen (NASDAQ: AMGN), which closed lower for a third day in a row on Thursday to finish just inside technically oversold territory, and Eli Lilly (NYSE: LLY). Shares of LLY have also pulled back for three consecutive sessions, but managed to finish near the highs of the day after opening near two-week closing lows.
Ahead of Friday’s open, both AMGN and LLY have modest, positive edges of more than a third of a percent, and neutral, 6 out of 10, ratings.
Last oversold just a few weeks ago, shares of AMGN rallied for five days in a row in response to a pullback that took the stock lower for four out of five trading days at the beginning of March. Eli Lilly’s last retreat to technically oversold levels, around the same time as the Amgen pullback, led to seven consecutive higher closes as the stock advanced to its highest levels since the beginning of the year.
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Dow and DuPont: Can These Chemical Brothers Bounce Back?
Industrial stocks in general were selling off ahead of the final trading day of the week. The Industrial Select Sector SPDRS ETF (NYSE: XLI), one proxy of the industrial stock sector, has closed lower for three days in a row, all in technically oversold territory.
Typical of the short-term weakness in industrials is the pullback in industrial chemical company, Dow Chemical (NYSE: DOW). Shares of DOW have just begun to sell-off in the wake of the stock climbing to its highest levels in months, the profit-taking sending DOW lower for three consecutive sessions, and into short-term oversold territory above the 200-day moving average.
Although the stock has a neutral, 6 out of 10, rating as of Thursday’s close, DOW also has a significant, short-term edge of more than three-quarters of a percent.
The last time shares of Dow Chemical were trading oversold near the beginning of the month, traders responded to the two-day sell-off by sending DOW higher for seven out of the following nine trading days for a gain of more than 9%.
Interestingly, rival chemical concern DuPont (NYSE: DD) has closed lower for five days in a row ahead of trading on Friday. Yet while the stock shares with Dow Chemical a neutral, 6 out of 10, rating, shares of DuPont have a far more modest short-term edge of under a third of a percent. Given this, it may be the case that DuPont will require additional volatility before buyers are lured off the sidelines with any enthusiasm.
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David Penn is Editor in Chief of TradingMarkets.com