Blog Post: One of my favorite set-ups, ATHOSB, found one stock, $SQM, check it out and see the tutorial
I scanned over 700 stocks on my IBD/MS watchlist and found only one that looks promising. This is one of my favorite set-ups. It scans for stocks that recently reached an all time high (ATH), then became oversold and now looks like it could bounce (OSB). The beauty of buying a strong stock that may be bouncing is that if the bounce fails it is immediately apparent and I can exit promptly with a small loss. My measure of oversold is based on the daily 10.1, 10.4 and 10.4.4 stochastics indicators. See if you can figure out the signals. These signals are designated by the black and green dots on this chart. In a weak market most set-ups fail, so it will be interesting to see if SQM works out. In a strong up-trending market this is a powerful set-up.
SQM has great fundamentals. MarketSmith indicates that this lithium producer is expected to grow earnings this year +353%, has a composite rating of 99 and ROE of 24%. Last quarter’s sales were up +282%. This is a CAN SLIM type stock. But can it climb in this market? Check out this chart. Note the prior oversold signals did not lead to a rise. I like the fact that SQM is just above its lower 2.15 Bollinger band and well below the upper band. A bounce could therefore extend to $111. My stop loss would be around $90.29. I do not own it. This is just an example for educational purposes only. You can find a tutorial created by my late co-instructor, David McCandlish, that shows how to add the dots to your chart here.
Blog Post: 1,032 new lows among US stocks 83 fewer than Monday; Nasdaq 100 stocks are very oversold and primed to bounce? See data on Bollinger bands.
I track after the close the percentage of Nasdaq100 stocks that traded intraday below their lower 2.15 Bollinger bands. Such a reading is extremely oversold and where stocks often find support. The past 3 days 86-94% of the Nasdaq 100 stocks were that oversold. The last time such a run occurred was at the bottom of the Covid rout on March 12,13 and 16, 2020, (89-96%). In fact, QQQ itself traded below its lower 2.15 daily BB on Monday and Tuesday. This suggests to me the market is primed to bounce on Wednesday if the Fed’s announcement is well accepted. Here are the stats for the Nasdaq 100 stocks from 4/14 until 6/14. (I know I missed 4/26.)
