With the Nasdaq finishing near session lows on Friday, it is no surprise to find many Nasdaq stocks trading lower and closing in or near oversold territory.
What has been more of a surprise, however, is the small number of Nasdaq stocks that are trading lower and moving toward oversold territory – but are still trading above their 200-day moving averages.
Why does this matter? Because when it comes to quality pullbacks, the snapback rallies that take stocks out of oversold territory tend to be more powerful and more enduring when they happen in bull market territory – in other words, above the 200-day moving average – compared to bear market territory.
So keeping our focus on the Nasdaq, here are three stocks that have pulled back to new short-term lows (here using 10-day closing lows), are in or near technically oversold levels, and are set to open in bull market territory when trading begins on Monday.
Shares of ^IDIX^ have closed lower for four out of the past five trading days, pulling back by more than 8% on Friday. Although not yet technically oversold, the fact that IDIX is trading at 10-day closing lows is one feature that may begin to attract traders to the stock. Also attractive is the stock’s short-term positive edge of more than 2%.
Also at new 10-day lows, but not yet technically oversold are shares of ^MXIM^. Shares of MXIM were lower fractionally on Friday, just under half a percent. Like IDIX, however, MXIM has finished lower for four out of the past five trading days. Any significant selling on Monday will likely take the stock, which already has a small, short-term, positive edge, into oversold territory above the 200-day moving average.
Perhaps closer than the other two stocks to oversold territory after pulling back by more than 4% on Friday are shares of ^SHFL^.
SHFL was trading at new, year-to-date, highs at the beginning of the week. And those highs proved irresistible to traders who began taking profits on Tuesday and remained the dominant force in the stock through Friday’s down close. Like all of the other stocks in today’s column, SHFL will require additional selling before it is trading at levels where traders have been goaded off the sidelines to enter the market as buyers. But the fact that all three stocks are trading at 10-day closing lows is a suggestion that, in the short-term, their downward days almost done.
All of the stocks in today’s report were available from research and data available through the Machine. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com