Swing Trading: Beware of Excessive Pessimism During Market Pullbacks
In yesterday’s 7 Stocks You Need to Know, I noted that two of the stronger sectors appeared to be retail and energy. On Wednesday, with the broader market rallying late in the session to close well off the lows, it was interesting to see exchange-traded funds like the ^XRT^ up more than 2% after pulling back for four out of the past five trading days.
With sentiment becoming increasingly extreme to the negative, traders should be wary of becoming influenced by the mood of the market. Looking for quality pullbacks in markets trading above the 200-day moving average (recall ^MHP^ from yesterday’s column or ^V^ up more than 4% today), and for strength below the 200-day moving average to sell (be wary of stocks like ^RIMM^ as they become overbought below the 200-day) remains a quantified way to effectively and consistently swing trade the stock market day in and day out.
Here are 7 Stocks You Need to Know for Thursday.
After pulling back for three days in a row, including a close in oversold territory above the 200-day moving average, shares of both ^FAST^ and ^AGN^ gained more than 3%.
Allergan announced quarterly earnings on Wednesday.
Up more than 13% ahead of trading on Thursday were shares of ^MA^. The stock, which we highlighted in yesterday’s 7 Stocks You Need to Know, had closed lower for four out of the previous six trading days, finishing the Tuesday session just outside of oversold territory above the 200-day moving average.
Both ^DF^ and ^KFT^ are scheduled to report quarterly earnings on Thursday. Shares of KFT had closed in oversold territory for three days in a row before edging higher in Wednesday’s session. By contrast, shares of Dean Foods continued to drift lower, closing below the 200-day moving average for a second day in a row.
Shares of ^PCLN^ rallied from their lowest levels of the Wednesday session to close slightly higher for the day. The company is scheduled to report quarterly earnings on Thursday.
Profit-taking in the market for ^AMZN^ shares sent the stock lower for a fourth day in a row ahead of trading on Thursday. AMZN has finished in oversold territory above the 200-day for the past two sessions.
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David Penn is Editor in Chief of TradingMarkets.com