Oversold? Not the Kind I’m Looking For
Here’s why I’m waiting for a ‘good’ oversold. Plus, let’s see if the little rally changed the indicators, and check out a bunch of down-and-out names.
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The Market
As I go through the charts there are so many stocks that are down and out. Just look at the Q&A section Wednesday evening and you’ll see a bunch of stocks that are down a decent amount.
I am not much of a fundamental analyst but I do know that the earnings estimates for the S&P 500 keep going up. Assuming those estimates continue to rise, or at least don’t fall, that would imply that when this current chop-fest/correction is over we ought to have some decent charts that look buyable.
So when you see that the Oscillator looks oversold, consider that what I’m really waiting for is a good oversold. By that I mean not something we see on the chart but something where the math behind the indicator says “this is a good oversold” condition. The same goes for the 30-day moving average of the advance/decline line.
Or the Volume Indicator (shown below). It continues to sit at 50%. But you know what? If we get the market to have some more downside, instead of this chop, over the next few weeks, then it really is possible that it falls under 49% or even to 47%, which would make this indicator oversold.
For the sentiment side of things that would mean seeing the put/call ratio’s moving averages rise toward the top of the page. Or seeing the various surveys showing a decent rise in bears and/or a drop off in bulls. But Wednesday, the Investors Intelligence Bull/Bear ratio sits at 3.18. That is just not saying “fear” or caution to me. I suspect the AAII bulls and bears will be bearish Thursday but they have leaned bearish for weeks — and they haven’t been wrong.
Last week the NAAIM folks were on margin. Perhaps that will back off this week. Will it back off enough to make a difference? I think it might be too soon for that, but I’m open to it.
In any event, we got a little rally but it didn’t change the indicators. However, notice the Utes were green after being red and bonds didn’t sell off much more. The DSI readings didn’t even change!
New Ideas
We looked at First Solar (FSLR) a few days ago and I said I thought we could start buying/nibbling in this $195-200 area. Here is a chart that is down and out and oversold and the risk/reward is good because if it plunges much more I know I am wrong. A little probing under the line is OK, not a plunge.
Today’s Indicator
The Volume Indicator is discussed above.
Q&A/Reader’s Feedback
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Credo Technology (CRDO) has some obvious support at $150. It is also getting oversold, having fallen 40% in just two weeks. But that looks like a top to me. I’d like to see it fill that gap around $135. Bottom line is it ought to bounce and come down again.
Take-Two Interactive (TTWO) broke two things at once when it broke that $230 area: the flat support line and the uptrend line. Here we see a chart that is getting oversold (-15%) in three weeks, but I would think somewhere in the $205-210 area the chart finds decent support and if it can do so when the market feels set up for a good rally I would like that.
I have tried to bottom fish in Axon Enterprise (AXON) a number of times and while I have occasionally caught a move, mostly the chart has been sideways for nearly a year. If this $475 area can hold on this trip down I’d get interested. If it breaks, then I would not be interested because it likely makes its way toward that $400-410 area.
Clorox (CLX) is into a support area but right now that is the best I can say about it. If it can turn around and rally back up through $99 then I would have to say this was a false break but otherwise I see no reason to bottom fish just yet.
