A disappointing jobs report provided the catalyst for traders to do what overbought conditions have been suggesting they would do sooner or later: sell.
The most important question for short term traders is whether or not this latest round of selling turns into a true pullback. Keep an eye on stocks that are trading well above their 200-day moving averages that have begun to sell off.
Many of these stocks could be merely experiencing the sort of periodic profit-taking that occurs after large moves to the upside. And statistically speaking, that kind of profit-taking above the 200-day moving average often has been an opportunity for the right kind of trader armed with the right kind of trading strategy.
For more on trading strategies based on buying markets after they have pulled back rather than after they have already rallied, click here to learn how to get your free copy of Larry Connors’ book, Short Term Trading Strategies That Work.
Among the companies scheduled to report quarterly earnings on Monday are ^AA^ and ^NVLS^.
Shares of Alcoa pulled back by more than 1% intraday on Friday, closing lower for two out of the past three trading days. NVLS ended the week down more than 2% in Friday’s session after closing lower for three out of the past four trading days.
Here are 7 Stocks You Need to Know for Monday
Bounces in bank stocks trading below the 200-day moving average have so far proven to be short-lived as traders sold the one-day rallies again on Friday. Stocks like ^BAC^ felll by more than 2%, while other financials like ^WFC^ dropped by more than 1%.
Semiconductor stocks were also being targeted by sellers at week’s end. Helping take the Nasdaq lower were pullbacks in stocks like ^AMAT^ and ^NVDA^, down more than 2% and just shy of 2%, respectively.
Also lower after rallying into overbought territory below the 200-day were shares of ^GOOG^. Google lost well over 2% ahead of trading on Monday.
What’s up on a down day? Shares of ^WYNN^ gained more than 2% to lead the S&P 500 on the final trading day of the week. The stock has closed higher for nine consecutive sessions to reach a new year to date high on Friday.
Stock of the Day: Our PowerRatings Stock of the Day is ^LLL^. Shares of LLL earned a one-point PowerRatings upgrade during trading on Friday after closing lower for a fourth day in a row. LLL is just coming off its highest levels of the year and pulled back by more than 1% ahead of trading on Friday.
For more information on trading stocks using PowerRatings, click here.
Click here to get 7 Stocks You Need to Know delivered for free every evening after the market closes.
David Penn is Editor in Chief of TradingMarkets.com