It's generally a good sign for the economy that the top extended stocks are two home-builders, a financial company (albeit a small one), and a retail company.
The logic is just the opposite for the Top-5 Under-extended stocks.
Finally, here are the most ‘bearishly under-extended' stocks in the S&P 500:
I've been doing these scans frequently, and one name seems to keep reaching the top of the list: First Solar (FSLR).
From the chart, it's easy to see why:
First Solar (FSLR) is becoming a case-study in pro-trend logic ("The trend is your friend" – "Do not fight a trend").
Again, Pro-Trend Retracement traders had numerous retracement or ‘bear flag' style opportunities all the way down.
While the trend has been strongly negative, counter-trend "Fade" traders have also had successful swings or quick scalps in the stock – good for quick-aggressive $5.00 to $10.00 'scalp swings.'
It's worth noting that counter-trend scalp strategies should only be deployed by aggressive and preferably very experienced traders – new or developing traders should play the safer pro-trend retracement opportunities which carry lower risk and defined entries and stop-losses.
The remaining stocks in the under-extended list include NetFlix (NFLX which garnered a lot of attention during its decline from its $300 per share peak), Alpha Natural (ANR), Chesapeake Energy (CHK – which also has appeared in prior under-extended scans), and MetroPCS Communications (PSC).
Remember, this is a quick-scan for potential trading opportunities depending on the style of trader you are and the strategies you use.
Don't just "scan and trade" – do a bit more homework as always before putting on any trading position though these types of scans can reveal names you might not consider otherwise.
Corey Rosenbloom, CMT
Afraid to Trade.com