Mining the Data on These 3 Oversold Stocks

Alcoa Inc (NYSE:AA), Barrick Gold Corporation (USA) (NYSE:ABX), and Silver Wheaton Corp. (USA) (NYSE:SLW) are all fresh off lows

Jul 24, 2015 at 2:26 PM
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Earlier today, I highlighted three biotech stocks that are in overbought territory, according to the historically predictive 14-Day Relative Strength Indicator (RSI). For a more in-depth explanation of that indicator, I'd recommend reading this piece by Schaeffer's Senior Quantitative Analyst Rocky White.

I now want to explore the stocks that have been stuck in oversold territory (RSI at or below 30) for some time -- specifically, at least two weeks, as of this past Wednesday. You'll notice in the data below a lot of metal producers, which makes sense given the recent drop in commodity prices. The three we'll take an in-depth look at are Alcoa Inc (NYSE:AA), Barrick Gold Corporation (USA) (NYSE:ABX), and Silver Wheaton Corp. (USA) (NYSE:SLW).

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AA  was last seen at an annual low of $9.65. It's been a brutal 2015 for shares of the aluminum giant, down 38.9%, and facing unrelenting pressure from their 10-day moving average -- though they did get a brief post-earnings lift, which should please broad-market bulls. Based on the table above, the equity has spent 32 consecutive days in oversold territory.

Today's technical "milestone" likely isn't being welcomed by traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Alcoa Inc's 10-day call/put volume ratio of 2.69 ranks just 7 percentage points shy of a 12-month peak. In other words, bullish bets have been flying off the shelves recently, relative to bearish.

ABX also touched a low today -- though the equity's bottom at $6.79 resides in territory not charted since 1989. At last check, the stock was down 0.7% at $7.02, bringing its year-to-date deficit to almost 35%. In addition, its RSI of 12 easily qualifies as oversold -- a streak that's stretched to two weeks.

Option traders have been gambling on losses for Barrick Gold Corporation, per data from the ISE, CBOE, and PHLX. Across those exchanges, the stock has amassed a 10-day put/call volume ratio 0.45 -- which tops almost three-quarters of comparable readings from the last year. This negativity is echoed among the brokerage crowd, where 13 of 16 analysts consider ABX a "hold" or worse.

Finally, SLW is yet another commodity stock in oversold territory, spending the past dozen days under RSI 30. As with its peers highlighted above, the silver concern is fresh off its own multi-year low of $12.07, but was 3% higher at $12.78, at last check. Since the security's late-January high of $24.22, it's given back close to half of its value.

Not surprisingly, Silver Wheaton Corp.'s bearish ranks are getting full. During the last two weeks at the ISE, CBOE, and PHLX, the stock has accumulated a put/call volume ratio of 0.72, which stands above all but 10% of comparable readings, looking back one year.

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