When I review my long-term, oversold-condition list each day, I want to know if a stock is on the "other side of the mountain," meaning, the stock has traded up, peaked and is sliding toward retesting the bottom. This is what attracted me to examine the chart of FXCM Inc. (FXCM).
What can you do with a stock that has traded down for five straight days and is lower again today? Let's see just how FXCM had traded when our long-term signals were generated.
Our long-term oversold signal was triggered Nov. 8, 2013, and the stock rallied 25%. On Jan. 3, 2014, FXCM generated a long-term overbought signal and the stock slid 13%. That pullback got the stock inside the buying zone of $16.53-$16.08 (50% 0.618 retracement levels from $14.64 low and $18.42 high). Without the long-term oversold in place, a bounce to a lower high came, followed by more downside. FXCM is now back to long-term oversold with little support.
I would look to be a small buyer now and add on a close above $15.58 (0.236 retracement). Other retracement levels are:
- 0.382 retracement at $15.87
- 50% retracement at $16.10
- 0.618 retracement at $16.33
- 50-day moving average at $16.88
At the time of publication, Berman had no positions in the stocks mentioned.