For traders and active investors looking to buy weakness and sell strength above the 200-day moving average, the recent price action in Deckers Outdoor Corp ( DECK ) was a thing of beauty.
The stock had pulled back for three days in a row, five out of the past six, heading into trading on Friday. Two of those last closes were in oversold territory, suggesting that the sellers truly had begun to pile on. Shares of DECK were also dropping toward their 200-day moving average, and a close beneath that level could mean the arrival of an entirely new cohort of traders looking to bet against the stock as it slipped below the 200-day.
However, traders who pressed their bets to the downside in Deckers found themselves scrambling on Friday as the stock bolted higher by more than 4%, rewarding those who had picked up shares of DECK as the stock had declined.
This type of snapback rally is common in stocks that become oversold above the 200-day moving average . And even in the recent price history of DECK there were plenty of examples of the stock rallying from short term oversold extremes. A four-day pullback in mid-November led to a rally during which DECK gained more than 7% in five days. Pulling back for three days in October, finishing twice in oversold territory, DECK rallied for three days in a row, gaining more than 6%.
Traders looking for additional weakness in this sector may want to keep an eye on Estee Lauder Companies Inc ( EL ) . Among the highest rated stocks in the S&P 500 heading into trading on Monday, EL hasfinished lower for two sessions in a row, four out of the past five, and is trading just outside of technically oversold territory.
Down three in a row after rallying to its highest levels in a year are shares of Blyth Inc ( BTH ) , a home decoration and accessories company. Shares of BTH pulled back by nearly 3% ahead of trading on Monday, falling to their lowest closing level in 20 days. And altough BTH is not yet oversold despite the three-day retreat, any significant selling on Monday likely will take the stock into oversold territory above the 200-day moving average where buyers, historically, have looked to acquire shares.
All of the stocks in today's report were available from research and data available through The Machine. To learn more, click here .
David Penn is Editor in Chief of TradingMarkets.com