Looking for an Oversold Bounce
- Posted by Greg Harmon
- on May 9th, 2012
There have been many redonkulous reactions to earnings reports this go round. They tend to bring out the reminders of the evils of holding stock through earnings. I agree…..if you are not protected or managing risk. In fact, I hope these professors protect their stock positions outside of earnings season and don’t just think about it for the event. My reaction to the volatile moves after earnings is to look for opportunities. Often traders throw out the baby with the bath water. My method is to look for a Relative Strength Index (RSI) that is under 20 or over 80 on a daily chart, where the price is starting to turn with the RSI turning and the Moving Average Convergence Divergence (MACD) indicator at least trending to support a turn. Here are three I had on the radar from this weekend.
Herbalife, $HLF, almost got dropped from the list today with the opening gap lower. But closing it and finishing at the 47.25 resistance level keeps it there. The RSI is moving higher and the MACD is improving. I t just needs the price to start moving for a momentum trade higher. You can be patient and wait for a move over the gap up price from May 2011 at 48.38 to enter.
Nanometrics, $NANO, had the RSI drop down only to 24 but it was a multi-year low. It is turning higher now with the MACD improving to confirm. The entry here is on a move over 14.63, the close of the last candle before the final move lower, on May 3rd.
Leap Wireless, $LEAP
Leap Wireless, $LEAP, is an example of why these trades are worth looking for. It came into today with the RSI turning back high and the MACD trending higher. After opening at 5.07 and hovering all morning it jumped 26% to 6.43 in 15 minutes at noon (unfortunately I was in the dentist’s chair). Even f you missed the initial break and got in after 5 minutes you still got to ride it from 5.50 to 6.40 or 16%. Below is the 5 min chart from Wednesday. This was a huge opportunity, but only if it was on your radar.
Leap Wireless, $LEAP, 5 minute
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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