| Four Metal Stocks Set To Shine |
| Commentary: One of the most popular tools in technical analysis that is used to predict a shift in a stock's direction is known as the relative strength index (RSI). This indicator's primary purpose is to determine when a given rally is becoming overbought or oversold. Generally speaking, readings below 30 suggest that the stock has been pushed down to an unjustifiably low level, causing most bullish traders to start looking for a good entry position. Given the broad market weakness, it is not surprising that there are many companies trading with low RSI values. However, what you may find interesting is how some of the bigger players in the metals market have been dominating the list of stocks trading at bargain-basement prices based on their extremely oversold RSI readings. In most cases, traders will use other technical indicators in combination with an extreme RSI value to increase the probability that a move higher will actually occur. Let's take a look at four stocks that have recently been trading in oversold territory. In the table above, you'll notice that AA and CENX have the lowest RSI values, which is likely because of their large exposure to aluminum prices, which have fallen substantially over the past few months. Weak metal prices across the board have made it difficult for companies such as the ones listed in the table to do business compared to a year ago and this has clearly been shown in the slumping share prices. The steady decline in the price of metal and mining shares has caused many of them to drop into oversold territory according to the relative strength index. The extremely low RSI readings suggest that we are nearing a bottom and that a bounce may be in store for this group of companies. |
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