Monday, June 8, 2009

Top Weighted Nasdaq 100 Components Very Overbought

I noted in Thursday night’s Subscriber Letter that AAPL and GOOG had both risen for 8 days in a row. Additionally, those two along with MSFT and ORCL all had 2-day RSI’s of over 98. That’s an extremely overbought level. These 4 stocks are among the top 7 and make up about 26% of the Nasdaq 100. Using the list of current Nasdaq 100 stocks I studied action among the current 8 highest weighted. In addition to the 4 above this includes RIMM, QCOM, CSCO and GILD. I looked at other times since 2007 that at least 4 of these 8 stocks closed with a 2-day RSI in excess of 94. Those results are below:

It’s not exactly a layup that a pullback should immediately begin. Still, risk appears to greatly outweigh reward when several of the top components are strongly overbought short-term. A brief look at the W/L Ratio suggests this. A pullback does normally come at some point in the next few days though. In fact of the 21 instances where the conditions were met, only one did not experience a close below the trigger day’s close within the next 4 days.


Anonymous said...


could I ask you how you research those studies? Do you use any programming language or simply excel or is it possible to do it with tradestation?

Thanks for an answer, Jozef

Rob Hanna said...

Most of the studies on the blog - including this one - are done using Tradestation.

Sometimes I will use Excel. For instance the Nasdaq/S&P Lead/Lag Model which I discussed recently used Excel (although I provided code for both on the free downloads page).


Celal Birader said...

Enough already!
All i want to know is :
when are these puppies
gonna drop big time ? :-)