The Dow's Most Oversold Stocks

Focus: STRATEGIES

The monthly review of the stocks in the Dow Jones Industrials reveals which ones are the most oversold but Moneyshow’s Tom Aspray cautions investors to be cautious about their entry level as they are likely to become more oversold before they bottom.

The stock market’s decline last Friday reversed many of the positive readings from the prior day’s strong close. The market internals are still locked in their month-long trading range but the downward pressure on the stock market seems to be growing as we head into the Election Day.

The past month has been especially hard for the some of the large cap, high yielding Dow stocks. The SPDR Diamond Trust (DIA) in October lost more than 1% more than the Spyder Trust (SPY). Of course concerns over a potential hike in the tax rate on dividends has clearly been a factor that has depressed many of these stocks.

Therefore, I found the results of my monthly scan of the 30 Dow stocks quite interesting. As a quick reminder this scan looks at where the 30 stocks that make up the Dow Industrials closed October in relation to their starc bands.

This has been a regular monthly feature for over a year. If a stock closed near its upper starc band (starc+) it is considered to be a risk buy and overbought. Conversely, closeness to the lower starc band (starc-) indicates that a stock is a high risk sell or oversold.

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Of course that does not mean that an overbought stock can’t go higher or an oversold stock can’t go lower.