No doubt, the stock market has been challenging in the past few
weeks. Although it started to back down from all-time highs in
September, the pace accelerated to a near panic in October, sending all
major indices below important trendlines and moving averages.
Most stocks sank with the market, yet some were in rather good shape technically before the stampede commenced.
TD Ameritrade (NYSE: AMTD) is one stock that seemed to get pulled down much further than its chart suggested it should.
While it's true that in chart analysis, whatever the stock does on
the charts is exactly what the market intended, some indicators have
already dropped to excessive levels.
Stochastics, for example, which measures a stock's placement in its
recent range to find overbought and oversold conditions, is now quite
oversold. In fact, it is reading in the single digits. The commonly used
parameters of a 14-period range with three-period smoothing returned a
reading of four in a scale of zero to 100. Anything below 20 is
considered oversold, so this is indeed extreme.
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