The Nasdaq Composite has been on a roller-coaster ride in May, with gaps up and down every few days for the index and Nasdaq stocks.
Profit Scanner powered by Recognia scans more than 65,000 charts each night. Based on that analysis, Profit Scanner identified five Nasdaq stocks that are showing technical signs of being overbought — and are ready to take a dip.
Let’s look at five overbought Nasdaq stocks that you’ll want to sell right away:
5 Overbought Nasdaq Stocks: Intuit Inc. (INTU)
INTU’s technicals were largely bullish coming into U.S. tax season and through the beginning of May — but now the stock is looking overbought and ready for a reversal.
On Tuesday, Intuit’s Commodity Channel Index turned short-term bearish. This oscillator shows a stock’s deviation from its moving average, and a reading of +100 indicates overbought, while a reading of -100 indicates oversold. In the chart you can see INTU drifting into overbought territory, and it looks to be trending lower from there.
This INTU chart also shows another pattern pointing to a bearish reversal: the Inside Bar. The Profit Scanner identified this particular pattern on Monday; it occurs during a strong uptrend and is marked by a trading range completely within the boundaries of the prior bar.
Basically, this tells us that the bulls are beginning to lose ground to the bears, and we may see lower prices ahead.
5 Overbought Nasdaq Stocks: SLM Corp (SLM)
Click to Enlarge SLM Corp (NASDAQ:SLM), more commonly known as the student loan provider Sallie Mae, has been running out of steam. On Tuesday, its Relative Strength Index (RSI) indicator turned short-term bearish.
The RSI tracks a stock’s strength versus its recent volatility levels by comparing up moves to down moves, and operates on a scale of 0 to 100. A reading of 70 suggests that the stock is overbought, based on the fact that it has recently put in a disproportionate number of advances compared to its usual tendency.
That 70 level is just where Sallie Mae is sitting right now. But the fluctuations are tightening — a signal that the shares are starting to reverse out of that overbought state.
If that weren’t enough of a warning sign, SLM has put in a couple of additional bearish signals in the last few sessions. On May 8, there was a Hanging Man — i.e., a candlestick at the top of an uptrend that has a small real body and a long lower shadow — that also points to a potential reversal lower.
And on Wednesday, Sallie Mae’s MACD indicator turned red as well, showing that near-term prices have weakened compared to their longer-term average.
5 Overbought Nasdaq Stocks: Equinix Inc
EQIX put in four bearish signals on Monday and Tuesday alone, two of which were the overbought indicators previously discussed: the RSI and the Commodity Channel Index.
Equinix also completed a bearish Engulfing Line at the Monday close. This pattern takes the form of a black candlestick that completely envelops a previous white candlestick, showing that bears have taken the reins and the stock is due to reverse lower.
You can see the Engulfing Line as well as the two overbought indicators in the chart.
5 Overbought Nasdaq Stocks: IAC/InterActiveCorp (IACI)
If this media company doesn’t sound familiar, perhaps some of its brands will: Match.com, OkCupid, Tinder, About.com, Investopedia, The Daily Beast and CollegeHumor.
IACI’s first bearish signal came on Tuesday, when its Commodity Channel Index started to turn below the +100 (overbought) level. That same day, the MACD crossed below its average — another bad omen for InterActive Corp’s stock price.
5 Overbought Nasdaq Stocks: Cowen Group Inc (COWN)
It’s put in three overbought signals in the last few sessions: from the RSI and the Commodity Channel Index on May 8, as well as another bearish signal from the latter indicator on Wednesday.
Also on Wednesday, COWN put in bearish signals from the Williams %R and the Momentum indicators, and the stock crossed below its 21-day moving average.
Like INTU, SLM, EQIX and IACI, it’s not looking like a great time to own COWN, at least in the short term … though traders may find these names to be a good play for bearish profits.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.