Looking for Stocks to Reach Oversold Levels
It’s likely that they’ll get there, but probably not until next week.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Market
Note: As many of you have probably noticed, I often note that I have bad eyes. I am finally doing something about it and will have cataract surgery on Wednesday. Thus, I will take the remainder of the week off, and if all goes well, I will write my next issue of Top Stocks on Sunday.
All that buying in the others yesterday mostly went poof today, which is why we need to wait for proper oversold conditions. Yet still, the Bank Index hasn’t broken (it threatens to, and then nothing happens), the Transports continue to hang in there. And the Utes (finally!) are perking up despite the move in interest rates.
Let me reiterate that I like the Utes down here. I don’t think it will be a smooth road, more likely a rocky one, but they are oversold and long forgotten. There is resistance just overhead that ought to halt this initial pop, but in general, this 43-44 area on XLU is where I get interested.
Then there are the bonds which got folks a bit antsy today. But did they panic? They did not. Heck, they didn’t even load up on puts as the put/call ratio was once again a relatively low .83. If I saw something in the 90s, I might say, well, folks are finally concerned.
The new lows increased again today, on both the NYSE and Nasdaq, so there is more leakage (as opposed to yesterday, where the selling dried up). The VIX has still not popped properly, and breadth continues to lag.
The McClellan Summation Indexes are headed down, but thus far, there is no extreme in what is needed to turn it back up. That number is currently +2500 advancers minus decliners on the NYSE. When it gets to +3000, it steps a toe into oversold (short-term) territory, and over +4000, it’s gotten extreme. If it gets extreme in the next few days, I will do my best to put something out. The chart is shown below.
I would love to tell you the DSI for bonds fell into the teens today (I expect it did), but as of this writing, it has not been published yet. Let’s assume it is a teenager, but if it fell under 15, I will send out a note before the morning.
Finally, I have started to do a what-if for the Russell 2000 Momentum Indicator. Keep in mind the RUT has been heading south for nearly a month now, so it’s time to see if/when it will get oversold (short term). My best calculation at this moment is just after Memorial Day. It’s got some light support in this 2700-2730 area.
New Ideas
About a week or so ago, I said I liked Alcoa (AA) in the low 60s, and it fell down there these last few days. This general area is where I think we start nibbling on it again.
Today’s Indicator
The McClellan Summation Index is discussed in full above.
Q&A/Reader’s Feedback
Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.
I love a stock trying to base. What I don’t love is a stock given the chance to break out of a base and failing to do so. Carrier (CARR) is in the second category. If it tumbles back into that 56-68 area, I might find it interesting again. Or at the last, I might find it interesting again when we get back to an oversold condition.
We looked at Raytheon Technologies (RTX) about a week or so ago, and I said I was a seller on a rally to 190. It didn’t even rally up there. What it did instead was whoosh back to 170—and it held. So as long as it stays over 170, I’d look for a rally.
I was asked to follow up on the Costco (COST) chart I liked last week. It got the breakout, and it ran. There is a measured target in the low 1200s, but it’s hard for me to imagine it will get there in a straight line. There is a short-term target of 1090-1100, so I suspect it stops there for a rest/correction.
