Swing Trading: Strategies for Trading Overbought Stocks at the End of the Month?


Many traders have asked about the End of the Month Effect now that we are in the final week of trading for July. If you aren't familiar with the End of the Month Effect, phenomena that has been quantified in the book Short Term Trading Strategies That Work: A Quantified Guide to Trading Stocks and ETFs by Larry Connors, then see Chapter 11 of Short Term Trading Strategies That Work .

If you don't have a copy of the book, you can get one for free. Just click the link below to indicate whether you would prefer paperback or a pdf digital download.

Short Term Trading Strategies That Work: A Quantified Guide To Trading Stocks and ETFs by Larry Connors .

Specifically, many traders have noted that when markets are oversold heading into the end of the month, the traditional upside bias can be especially pronounced. The question on the minds of some is whether or not this upward bias is still in effect even when markets are in overbought territory as the end of the month arrives.

Again, you can find clues to answer this question in Chapter 11 of Short Term Trading Strategies That Work .  We will discuss this more in tomorrow's edition of 7 Stocks You Need to Know .

Here are 7 Stocks You Need to Know for Tuesday

A weak open followed by intraday strength left most of the major equity indexes lower ahead of trading on Tuesday, but off the lowest levels of Monday's session.

Leading the S&P 500 higher on the first trading day of the week were shares of E Trade Financial Corp (ETFC | PowerRating ) .

Shares of ETFC gained well over 5%, closing higher for a fifth day in a row. Monday's close was the highest in the stock since late April.

Up more than 1% intraday before pulling back ahead of its scheduled earnings announcement on Tuesday was Electronic Arts Inc (ERTS | PowerRating ) .

Also advancing ahead of its scheduled earnings report, International Game Technology (IGT | PowerRating ) rallied to its highest closing level since mid-May.

Closing at its highest levels of the year were shares of Whole Foods Market WFM (WFM | PowerRating ) . The stock gained for a second day in a row ahead of trading on Tuesday.

Netflix Inc (NFLX | PowerRating ) announced growth projections after the bell on Monday that were worse than analysts had expected. The stock had closed higher for a second day in a row, gaining more than 1%, ahead of the earnings report, and was down sharply afterhours.

Shares of Amazon.Com Inc (AMZN | PowerRating ) pulled back by more than 1% on Monday, closing lower for three out of the past four trading days. Amazon.com is scheduled to report quarterly earnings on Tuesday.

Also scheduled to report earnings on Tuesday is Ford Motor Co (F | PowerRating ) . Shares of F were down more than 1% on Monday. The stock has traded below its 200-day moving average since late May.

Remember, you can get 7 Stocks You Need to Know delivered for free every evening after the market closes. Click here to sign up .

David Penn is Editor in Chief of TradingMarkets.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Stocks

Referenced Stocks: AMZN , ERTS , ETFC , F , IGT

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