Which Stocks Provide Solid Entry Opportunities Right Now

Plus, quantifying stock performance after prior pullbacks to certain levels

Senior Quantitative Analyst
Jan 12, 2022 at 8:00 AM
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The SPDR S&P 500 ETF Trust (SPY) recently closed below its 50-day moving average, while the Invesco QQQ Trust Series 1 (QQQ) closed below its 100-day moving average. During this broad-market pullback, it is a good time to look for specific stocks that are retreating to popular moving averages.

I will, however, go a step further and quantify the performance of these stocks after prior pullbacks to specific levels. The resulting list of stocks should provide actionable entry opportunities. 

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Which Stocks Are Most Likely to Bounce

When you look at a price chart for a stock, along with a moving average, sometimes the stock has a history of blowing right through the moving average, as if it wasn’t there. For other stocks, the moving average looks like a wall, stopping the stock in its tracks (see the 100-day moving average for the QQQ in the chart above). What I’m doing next is finding stocks that not only pulled back recently to a moving average, but also have a history of respecting that moving average.

To achieve this, I looked back over the past five years and tracked each stock along with its 50-day moving average. Since I’m looking specifically for pullbacks, I created a rule that the stock had to be above the moving average 80% of the time over past couple of months. Then, once the low price on the stock fell within 2% of the moving average, I found the return for that stock over the next month of trading.

The list below shows the ten stocks that were most likely to be positive after one of these signals off the 50-day moving average.

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Here is the same analysis, but it lists stocks pulling back to the 100-day moving average. This one may find some steeper pullbacks.

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Here’s one more list of stocks. It’s the same method used above, but it uses the 200-day moving average. This list will tend to show even steeper pullbacks. This type of analysis is not limited to popular, round-number moving averages. I’ve found this exercise worthwhile for many moving averages. For example, some stocks might tend to respect the 80-day moving average. If I’m bullish on a stock and I find it pulling back to a well-respected moving average, that’s a good bullet point for a case to enter it right then.

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