Swing Trading: Overbought Below the 200-day Moving Average
Heading into the second half of the week, all the major equity indexes are in overbought territory below the 200-day moving average. Up for 2-3 days in a row and overbought are the ^SPY^, the ^IWM^ as well as the ^QQQ^ and the ^DIA^.
While more and more traders are looking for higher prices in the near term (remember the “earthquake bottom” calls from yesterday?), the statistics when it comes to markets that become overbought below the 200-day moving average are clear, and knowing whether the edges are on the long side or the short side as markets become more short term overbought below the 200-day moving average can mean all the difference when trading volatile markets.
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Scheduled to report quarterly earnings on Thursday are ^BIG^ and ^HRL^.
Both stocks are up three in a row and short-term overbought, but shares of BIG are trading below their 200-day moving average.
Here are 7 Stocks You Need to Know for Thursday
Shares of ^V^ rallied by 3% heading into trading on Thursday. Closing at its highest level since the beginning of the month, Visa has finished higher for three days in a row and is short term overbought.
Leading the S&P 500 higher on Wednesday were shares of ^BAC^. Shares of BAC rallied by more than 10% in Wednesday’s session after closing lower for four days in a row. Note that Bank of America has been trading below its 200-day moving average since April.
Shares of ^GOOG^ have closed higher for three days in a row below the 200-day moving average and could end up overbought below that level should buyers remain committed to the stock. GOOG was at oversold extremes as recently as last week.
Want to know how professional traders trade exchange-traded funds (ETFs)? Click here to read part one of Larry Connors’ series on ETF trading: “How to Find the Best ETFs to Trade Every Day.”
^AEO^ dropped by more than 8% ahead of trading on Thursday after missing analyst earnings’ estimates. By contrast, shares of retailer ^M^ were up more than 3%, closing in overbought territory below the 200-day.
Up more than 3% to trade back above its 200-day moving average intraday were shares of ^DECK^. DECK has closed below its 200-day for the past six days in a row.
New to Swing Trading? Read our primer, What is Swing Trading? .
We highlighted shares of ^NEM^ in yesterday’s 7 Stocks You Need to Know. Heading into trading on Thursday, NEM has closed lower for two days in a row, down more than 1% on Wednesday.
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David Penn is Editor in Chief of TradingMarkets.com