(By Rich Bieglmeier) With the stock market riding the slide, investors might consider searching for companies that are oversold and trading near support levels. iStock has identified four fallen equities with relative strength readings well under 30 and, according to our view of the tape, could have limited downside with headroom when the dead cat is let out of the bag.
Applied Industrial Technologies, Inc. (AIT) – relative strength 24.48: The industrial equipment wholesaler reported earnings that missed Wall Street's consensus estimate by a penny, lowed revenue estimates for 2013, but left eps guidance intact.
Since the middle of September, AIT shares have dumped more than 12.5% and are within 50 cents of a line of support at $38, and then another at $37. Any turnaround in sentiment could lift AIT's price to $40. A close below $37 and iStock would be sayonara.
Alexion Pharmaceuticals, Inc. (ALXN) – relative strength 23.97: Today, the biotech reported earnings that smoked the street's outlook by 13 cents with inline sales. Additionally, management lifted their profit guidance for the remainder of the year and said revenues would be at the high end of the range. Normally, the combo is a recipe for a healthy rip higher, not so much for ALXN today.
Shares are off almost 5% on the day, which puts the price near two clear levels of support, ALXN's 200-day moving average of $95.20 and a trend line of support at $95. Should investors reconsider Alexion's profit announcement, a return trip to today's high of $101.97 is out of the question.
We probably wouldn't give the NASDAQ 100 member much wiggle room below $94 before cutting ties.
Casey's General Stores, Inc. (CASY) – relative strength 26.28: No earnings news to report on this convenience store operator. Since the start of October, CASY hasn't been so mighty and most definitely struck out, falling from $57.26. The price consolidated between $49 and $50 for the last week. From a technical analysis viewpoint, the setup is as easy as it gets; buy the $50 breakout and cut losses if the stocks closes below $49. In fact, some traders would suggest using a double stock; which means if you bought 100 shares, then you sell 200 if CASY breaches $49 on close. The trade would take the position to a short of 100 shares from long 100.
Liquidity Services, Inc. (LQDT) – relative strength 24.91: Forbes says the online auction marketplaces for surplus and salvage assets is the 35th best small publicly traded company. Apparently, recent stock performance is not one of the criteria. LQDT has slumped by nearly $20 in a month.
In iStock's view, Liquidity should find plenty of support at $37.50. Meanwhile, LQDT's MACD line is beginning to trend higher, and a bullish crossover could be in the chart's immediate future. Any buying pressure and we can see a return run to $40 to $42.50.
Once again, if the online auctioneer bids a close below $37 investors might consider a double stop.