Two of the world’s most popular Internet stocks: Baidu Inc. (NASDAQ: BIDU) and Google Inc. (NASDAQ: GOOG) are one selling day away from technically oversold territory.
The correction in BIDU so far has been the far more orderly retreat of the two. Pulling back by just over 2%, shares of Baidu have traded down to the lower boundary of a trading range that extends back nearly a month to late March.
The Thursday pullback means that Baidu now has closed lower for three out of the past four trading days to finish just outside of technically oversold territory. The stock earned a ratings upgrade late in trading on Thursday, boosting the stock’s rating to a 7 out of 10 – just one point below our “consider buying” range of 8 out of 10 to 10 out of 10. The positive edge in the stock is more than half a percent.
By contrast, volatility has ruled everything around Google in recent days. The stock has dropped by nearly seven and a half percent over the past five trading days, all but four of which featured lower closes. GOOG is not only just above oversold levels, but is also trading at its lowest point in more than two months.
The selling in Google shares has earned the stock a 7 out of 10 rating – like Baidu, earned late in Thursday’s session. The positive edge of just over a third of a percent is modest, but could expand significantly if sellers keep the offensive and take the stock lower over the next few days.
One Internet stock that is closer to short-term overbought levels than short-term oversold levels is Renren Inc. (NASDAQ: RENN). Only trading in bull market territory since mid-April, the stock has closed higher for seven out of the last nine trading days. Currently trading in neutral territory with a small, overbought bias, shares of RENN have a very small negative edge (a tenth of a percent). Additional strength in Renren in the near-term likely will increase this negative, short-term edge.
Traders interested in trading Internet stocks as a group may want to put the First Trust Dow Jones Internet Index ETF (NYSE: FDN) on their watchlists. The ETF includes among its holdings many of the top Internet stocks: from Google to Yahoo! Inc. (NASDAQ: YHOO). FDN also includes Internet infrastructure stocks like Juniper Networks (NASDAQ: JNPR) and Akamai Technologies (NASDAQ: AKAM).
Heading into Friday’s trading, FDN is in neutral territory, reversing lower fractionally on Thursday after rallying for two days.
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David Penn is Editor in Chief of TradingMarkets.com