Down But Not Out: 5 Oversold Stocks for Traders
Stocks are off to a weak start again on Tuesday in the wake of Friday’s aggressive sell-off.
This suggests that many of the pullbacks that have developed over the past few days are still intact. Here, in today’s report, we’ll take a look at some of the stocks that remain attractive based on their high Short Term PowerRatings and one of our top stock market indicators: consecutive down days.
Among the many things we tested in our review of millions of simulated, short term stock trades between 1995 and 2007, we looked at how stocks reacted after closing lower for multiple consecutive days. Our results – certainly compared to conventional wisdom – were counter-intuitive.
We found that stocks that were trading above the 200-day moving average AND had closed lower for five or more consecutive trading days actually outperformed the average stock in one-day, two-day and one-week timeframes.
Click here to read our research into stocks that have been down for five or more consecutive days.
While this might seem backwards, our research was definitive and actually has some common sense to it. Strong stocks, stocks trading above their 200-day moving averages, tend to have a bias to the upside. That bias is not negated by sell-offs and pullbacks, only delayed. And the longer that “delay” lasts, the more likely the stock’s response to it will be powerful as the stock resumes its upward trajectory.
And when combined with high Short Term PowerRatings, stocks that have been down day after day after day often become particularly attractive candidates for trades to the upside.
Let’s take a look at five stocks that fall into this category as of this morning’s open.
Insituform Technologies [NASDAQ:INSU] Short Term PowerRating 10. RSI(2): 0.146
Netscout Systems Inc. [NASDAQ:NTCT] Short Term PowerRating 9. RSI(2): 3.51
Bob Evans Farms Inc. [NASDAQ:BOBE] Short Term PowerRating 8. RSI(2): 1.45
Syke Enterprises Inc. [NASDAQ:SYKE] Short Term PowerRating 8. RSI(2): 3.31
Abiomed Inc. [NASDAQ:ABMD] Short Term PowerRating 8. RSI(2): 19.31
Of the five stocks in today’s report, two of the stocks are among some of the most oversold stocks we are likely to see. These two are Insituform Technologies, with its 2-period RSI of less than 1, and Bob Evans Farms Inc., with its 2-period RSI of less than 2. Given INSU’s Short Term PowerRating of 10, Insituform Technologies may be the superior pick, but the fact that so many of these stocks are clearly oversold suggests that significant opportunities may be found in more than one potential trade.
Insituform Technologies
Bob Evans Farms Inc.
One note: although Abiomed has a 2-period RSI of more than 19 as of Monday’s open, the stock since the open has pulled back further, creating a much more attractive oversold condition in the stock. As of this writing, an hour into the trading day on Tuesday, Abiomed has a 2-period RSI of 5.02.
Does your stock trading need a tune-up? Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of nearly 17 to 1 after five days.
| Click here to start your free, 7-day trial to our Short Term PowerRatings! |
Whether you have a trading strategy of your own that could use a boost or are looking for a way to tell the stocks that will move higher in the short term from the stocks that are more likely to disappoint, our Short Term PowerRatings are based on more than a decade of quantified, backtested simulated stock trades involving millions of stocks between 1995 and 2007. Click the link above or call us at 888-484-8220, extension 1, and start your free trial today.
David Penn is the Senior Editor at TradingMarkets.com.