Last week, I highlighted 7 stocks that high probability traders should keep an eye on. These stocks were all oversold or overbought in the short term, based on the research in the book by Larry
Connors and Cesar Alvarez, Short Term Trading Strategies That Work (click
here to order your copy).
Before taking a look at 7 Stocks for this week, I thought it would be a good idea to recap how some of the stocks from last week’s list performed.
From its oversold close last Friday, shares of ^NKE^ rallied over the next two days to close higher by more than 1%.
A similar rally helped high probability traders lock in gains in stocks like ^COP^, which also closed in oversold territory on Friday.
Perhaps the biggest winner from last week’s Short Term Trading Strategies That Work: 7 Stocks You Need to Know were shares of ^UPS^ (above). UPS also closed in oversold territory on Friday and, two days later, was rallying into strength by well over 2%.
Let’s take a look at stocks for the coming week.
Coming into Monday’s trading oversold, shares of ^DTV^ have bounded higher in early trading. Any renewed weakness in the stock could provide an opportunity for short term, high probability traders looking to buy pullbacks in the current market.
Also entering Monday oversold, but moving higher in early trading is ^VOD^.
Closing lower for two days in a row, shares of VOD slid to their most oversold levels of the summer on Friday. The current bounce in the stock is a direct result of this recent selling.
Up by more than 3% after pulling back into oversold territory above the 200-day moving average are shares of ^WCRX^. Going into trading on Monday, WCRX had only closed lower for two days, but that two-day pullback was enough to drop the WCRX into oversold territory.
The rally in WCRX has so far been strong enough to push the stock above its 5-day moving average, an exit signal for many high probability traders.
I included ^GOOG^ (below) in today’s report because it is an interesting case of a stock that is very popular, very newsworthy and very, very oversold.
Ordinarily, this might be a potentially attractive opportunity for high probability traders. However, most importantly, shares of GOOG are trading below their 200-day moving average. Based on the
research shown in Short Term Trading Strategies That Work, we know that stocks trading below their 200-day moving averages are best avoided or sold short.
Keep this in mind when looking at a stock like Google. Not all oversold situations are created equally – especially when they are trading below the 200-day moving average.
There are three stocks that have become overbought below the 200-day moving average that high probability traders may want to keep an eye on, as well. These stocks include ^SYMC^, which bolted higher by more than 3% on Friday. Friday’s close marked the stock’s second close in overbought territory below the 200-day.
Interest in SYMC was likely stoked by news that ^INTC^ was in the process of acquiring McAfee, Symantec’s rival in the Internet security business.
Also overbought below the 200-day are shares of ^MRVL^.
Even after selling off for the balance of the trading day on Friday, MRVL finished the session up more than 8%.
Shares of ^NVDA^ have closed higher for five consecutive trading days below the 200-day, with three of those trading sessions closing in overbought territory. Note that the current overbought conditions in NVDA are the most overbought the stock has experienced all summer.
David Penn is Editor in Chief at TradingMarkets.com.