When it comes to trading stocks, no one has ever accused the Dow industrials of being the liveliest bunch of stocks in the market. But if the three stocks in today’s report behave as they have historically, then there could be plenty of action in the Dow over the next few days.
Which stocks and why so? The stocks are all blue chip, Dow names that have rallied toward levels from which, again historically speaking, they have tended to reverse and head lower in the short term. Whether or not these stocks are headed for significant downtrends or just brief pullbacks on their way to higher prices, traders looking to position themselves around those stocks that are most likely to make big moves in the next few days may want to add stocks like these to their watchlists.
Shares of both DuPont (DD) and Home Depot (HD) have closed higher for seven days in a row, finishing in overbought territory below the 200-day moving average for the past three consecutive sessions. Both stocks plunged below the 200-day back in early August, and while shares of Dupont took another leg lower in mid-September, shares of Home Depot have advanced to their highest levels in months.
And although not as overbought as DD and HD above, shares of General Electric (GE) have closed higher for the past three days in a row – all in overbought territory – gaining ground beneath the 200-day for six of the past seven trading sessions. GE was last trading at these levels in mid-September, shortly before selling off by more than 5% over the following four consecutive trading days.
All three stocks in today’s report were pulled from stock lists available through PowerRatings. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com