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Stocks often make volatile moves after reporting earnings. These moves are unpredictable but we do know from quantified back testing of a number of trading strategies that buying oversold stocks can be profitable. Earnings reports could provide the catalyst for a price bounce of an oversold stock. With this in mind, we created a list of companies due to report earnings this week. We then created a watchlist of these companies in The TradingMarkets Screener. The table below shows the stocks and is sorted by ConnorsRSI.
ConnorsRSI is a composite indicator consisting of three components. This indicator uses data regarding price momentum, the duration of the up/down trend and the relative magnitude of price change. With a single indicator combining three pieces of information, ConnorsRSI is capturing more information than we can with a one-dimensional indicator like the more familiar 2-period RSI, or RSI(2). While RSI(2) is a useful indicator, we know from quantified back-testing involving tens of thousands of trades that extreme values of ConnorsRSI are much more likely to predict a large price move than similar values of RSI(2). Those test results are available in An Introduction to ConnorsRSI, 2nd Edition which can be downloaded for free here.
The stocks shown above could be placed on a watchlist and could be considered buys on additional weakness.
Now let’s look at the most overbought and oversold stocks (according to ConnorsRSI) heading into trading for September 23, 2014. ConnorsRSI is a proprietary and quantified momentum oscillator developed by Connors Research that indicates the level to which a security is overbought (high values) or oversold (low values).
NM (Navios Maritime Holdings Inc) is the most oversold equity with a ConnorsRSI reading of 0.54.
XOP (SPDR S&P Oil & Gas Explor & Prodtn ETF) is the most oversold non-leveraged ETF with a ConnorsRSI reading of 5.08.
NUGT (Direxion Gold Miners Bull 3X) is the most oversold leveraged ETF with a ConnorsRSI reading of 6.58. This is the second day in a row NUGT has been the most oversold leveraged ETF.
DRC (Dresser-Rand Group Inc) is the most overbought stock with a ConnorsRSI reading of 95.97.
DUST (Direxion Gold Miners Bear 3X) is the most overbought ETF with a ConnorsRSI reading of 92.61. This is the second consecutive day DUST has been the overbought ETF.
TradingMarkets Lists provide users pre-populated lists of stocks and ETFs identifying symbols with overbought and oversold ConnorsRSI and Bollinger Bands® readings. The Screener Lists are powered by The TradingMarkets Screener.
All data is as of the end of day on 9/22/2014.