Each day, TradingMarkets publishes7 Trading Ideas for Today, a selection of stocks from our daily indicators. TradingMarkets Stock Indicators are based upon our latest quantitative research, and highlight trading edges backed by our database of more than 7-million historical simulated trades.
On Tuesday, March 6, Deere (DE | PowerRating) was the candidate from the 2-Period RSI Below 2 list. These are stocks that have a 2-period RSI reading below 2 and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average with a 2-period RSI reading below 2 have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
The TradingMarkets mantra is to “buy weakness,” and that is exactly what you could have done here. While everyone in the media was warning of major weakness, our research shows that these types of oversold conditions create a bullish edge for stocks.
1-day later, DE closed +1.2%.
2-days later, DE closed +4.9%.
5-days later, DE closed +6.9%.
Obviously, results like these do not occur every time, but our quantified research clearly shows that the edges exist during extreme oversold or overbought conditions.
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