Large-cap stocks have been out of favor in 2013, thus taking some of the big name Dow Industrial stocks back to more important support. Moneyshow’s Tom Aspray’s analysis of the ten most oversold Dow stocks has identified some interesting opportunities.
The Dow Industrials performed the best last week gaining 0.6% and also beat the S&P 500 in February. Stocks are lower early Monday with the Dow futures losing about 40 points. The selling started in Asia as efforts by China to dampen real estate speculation caught the market by surprise.
After last week’s close, my review of the technical evidence suggested that we could see more choppy and volatile trading before the intermediate-term uptrend resumes. Of course, many individual stocks had nice gains in the past month even though the market was correcting. Verizon Communications (VZ) was up close 7% in February while the Spyder Trust (SPY) was up just over 1%.
In my monthly starc band analysis of the Dow stocks, several interesting stocks turned up. This scan determines which of the Dow stocks are closest to their monthly starc bands. Those nearest the starc+ bands are the most overbought while those closest to the starc- bands are the most oversold. Of course, this is just one measure of whether a stock or ETF is overbought or oversold.
However, I have found that combining this scan with the monthly analysis of the chart, relative performance, and on-balance volume can be quite effective in identifying good buying opportunities. At the top of the list is Wal-Mart Stores Inc. (WMT) as it is just 10.9% above its monthly starc- band.
Two of the other Dow stocks on the list International Business Machines (IBM) and McDonald's Corporation (MCD) were discussed last Monday. The four Dow stocks I will focus on today either offer attractive new opportunities or provide some good technical insight that may help you in the future.
- The ten-year resistance at $64.20 was overcome in March 2012, which was a very bullish sign.
- The next resistance is at $75-$77.60 with the monthly starc+ band at $80.19.
- The width of the ten-year trading range has upside targets in the $84-$88 area.
- The relative performance has dropped below its WMA but is still holding well above its uptrend, line b.
- The monthly OBV closed February very close to new highs as it tested its rising WMA on the correction.
- There is minor support in the $69.70-$70.58 area.
Exxon Mobil Corp. (XOM) broke through its downtrend, line d, that connected the 2008 and 2011 highs. The breakout level was retested last November and December.
- There is monthly resistance now at $91.93-$93.67 with the monthly starc+ band at $101.87.
- The RS line has been below its WMA since the end of November.
- The relative performance needs to move through the multi-year resistance at line f, to confirm it is leading the market higher.
- The monthly OBV is testing its WMA as it has been in a narrow range for the past three months.
- A move in the OBV above its resistance at line g, would be a very bullish sign.
- There is first good support at $88.73 -$87.94 with monthly support at $84.70.
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