As the overseas market starts to signal that the relief rally that drove prices higher may be coming to a close, it leaves behind it a long list of potentially oversold or technically challenged stocks that are ripe for quick reversal to lower prices.
The list below contains three of the stocks that are among those with a higher likelihood of selling pressure given their oversold condition and other technical conditions. Among them are Apple Inc. (NASDQ:AAPL), Smith & Wesson Holding Corp (NASDAQ:SWHC) and Sprint Corporation (NYSE:S).
Apple Inc. (AAPL)
Everybody’s favorite stock, Apple Inc., makes the list today, as the stock has rallied a paltry 4.2% from the $92 level as the rest of the market has found room to move much higher. The lack of rally potential has to have the Apple bulls on guard, but the technicals that the stock has to face this week should be more of a concern for the same group.
As of Friday, Apple stock had stalled at the confluence of its 20- and 50-day moving averages. The combination of technical resistance builds pressure overhead for the stock just as the rally appears to be losing steam.
The technicians will be likely take action on this still-overcrowded stock, as it appears that we could be looking at a chart that is likely to shave another 4% from Apple Inc.’s value before hitting any support.
Smith & Wesson Holding Corp (SWHC)
Gun and ammunition manufacturers have been on a relatively volatile, but steady, road to higher prices as the FBI and retailers have been reporting that guns have been flying off of the shelves over the last few months. This has been the result of consumers preparing for what they consider a harder regulatory environment for Smith & Wesson Holding Company.
Smith & Wesson Holding Company’s stock has rallied more than 20% over the last month, taking shares to an overbought condition that is likely to result in profit taking.
In addition to the overbought condition, SWHC shares are sitting just below the $28 level, which has been chart resistance in the past.
Patient traders will likely lock in gains on SWHC at this point, putting some pressure on the shares to move lower and likely offer a chance to buy the shares back at a better value.
Sprint Corporation (S)
Sprint shares have been on a tear as the company has been making fundamental moves to potentially build out its wireless network further. The market recognizes these moves with a 20% rally in the last two weeks.
The sudden surge in stock price has Sprint shares trading in technically overbought conditions as they crest over the $4.50 price mark.
Bringing up something we don’t see too often, Sprint shares have now traded 12.5% higher than the $4 level, which is currently flooded with call option open interest. This is important, as large amounts of call open interest usually act as a technical draw for the underlying security, meaning that there should be additional pressure on the stock to move to $4 over the next week.
Support should kick in for Sprint shares as they approach $4, which gives the traders a 12.5% window to trade within — happy profit hunting with that.
As of this writing, Johnson Research Group did not hold any of the aforementioned securities.
