High Probability Trading: Strategies for Top Stocks (PFE, MA, WMT) and Top ETFs (EEM, EWD, FAZ)
On Monday, we took a look at some of the stocks that were entering extreme territory – either extremely oversold or extremely overbought.
These are the stocks, based on our research, that have
historically made significant, short term moves and are among those most actively sought after by high probability traders.
Monday’s list included only stocks from the Nasdaq 100 (tracking
ETFs: ^QQQQ^, ^QLD^, and the ^QID^). For today, we will look at the blue chip stocks of the S&P 100 in search of stocks that have become overbought – and potential short sales – or oversold, making them potential candidates for long trades.
First, a follow-up from Monday in the form of an update on the progress of formerly overbought ^QGEN^.
Shares of QGEN fell after closing in extreme overbought territory for three out of four trading days. The overbought sell-off took the stock down by well over 4%.
Now, let’s look forward:
Stocks:
As far as stocks in the S&P 100 are concerned, there are far more stocks that are overbought below the 200-day moving average than oversold above it. These stocks include a number of drug or
pharmaceutical names such as ^ABT^, ^BAX^, ^MRK^ and ^PFE^ (below).
Other stocks in overbought territory include ^MA^ and ^WMT^.
On the oversold side of things, the only true potential option is in Halliburton ^HAL^ – though the stock has slipped below its 200-day moving average in the first few minutes of trading on
Wednesday.
Exchange-Traded Funds/Leveraged ETFs:
While many blue chip stocks are climbing higher and higher into overbought territory below the 200-day, a sizable number of exchange-traded funds are actually becoming more and more oversold above the 200-day.
These oversold ETFs include country funds like the ^EWD^, and the ^EFA^, and the ^EEM^ (below).
EEM in particular is experiencing another round of selling early in trading on Wednesday.
With regard to leveraged ETFs, inverse leveraged funds have been climbing into overbought territory early on Wednesday, with funds like the ^FAZ^ up by more than 5% in the first hour of trading at midweek.
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David Penn is Editor in Chief at TradingMarkets.com.