Scanning for the Most Extended Stocks

09/19/2013 7:00 am EST

Focus: STOCKS

Corey Rosenbloom

Founder and President, Afraid to Trade

Running these scans can become starting points for you to do other research to see whether trading opportunities exist based on your strategies, writes technician Corey Rosenbloom of AfraidToTrade.com.

It’s time to update our Most Over and Under-Extended Stock scans for the month of September!

Let’s start our search with the top six stocks most over-extended (on a percentage basis) up away from their rising 200-day simple moving averages:

chart
Click to Enlarge

It’s often interesting how a strong stock (or weak stock) can remain in the “top extended list” month after month, and that’s part of the purposes of the scan.

We want to locate strongly trending stocks with incoming money flow and use them either as trading vehicles (buying retracements or flag patterns) or investing candidates (holding for as long as possible until the trend structure reverses).

This type of simple scan helps us achieve these goals.

For example, take a look at a few prior updates on GameStop (GME), a stock that has consistently appeared in “top trending” stock lists (along with Best Buy lately):

Back to the current candidates, Best Buy (BBY) tops the list with a 67% reading above its rising 200-day SMA.

Other strong uptrending stocks, as seen in the chart below, include Micron Technologies (MU), popular stock Netflix (NFLX), Goodyear Tires (GT), and E*Trade Financial (ETFC):

chart
Click to Enlarge

Of these six names, Best Buy (BBY), GameStop (GME), and Netflix (NFLX) ranked in the Top Stocks Most Extended to end July 2013 prior post.

The goal of this type of scan is to find powerful pro-trending names to trade (conservative strategy), or candidates to look for aggressive reversals or fade trades (not my preferred use of this list).

The same logic can be applied to the “weak and getting weaker” stocks most under-extended from their falling 200-day SMA:

chart
Click to Enlarge

Similarly, Intuitive Surgical (ISRG) and Newmont Mining (NEM) carried over from July’s extended stock screen.

Two stocks that have been in the news with multiple bearish headlines—Abercrombie and Fitch (ANF) and JC Penney (JCP)—also appear on the most under-extended (weak and getting weaker) list.

 

chart
Click to Enlarge

These scans are starting points or launch-pads for you to do other research to see whether trading opportunities exist based on your strategies.

The “over and under-extended scans” can bring candidates to your attention that may otherwise not show up on other stock screens.

By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com

Related Articles on STOCKS

Keyword Image
Seasonal Trading in Oil
18 hours ago

Oil companies typically come into favor in mid-December and remain so until late April or early May ...