For this past year’s darlings on Wall Street, payback has quickly become a “you-know-what” kind of situation. But what’s that mean for today’s investors going forward? Based on the following three wildly oversold stocks, now is the time to be panicked about stocks to buy, not sell, before the opportunity disappears.
Risk on. Risk off. The fear is here on Wall Street. A year removed from last March’s historic record-breaking stock market crash, fear is being revisited. Well, to a certain extent. But much like last year and all past abrupt price dislocations, today’s unnerving drama is highly-unlikely to become a more permanent feature of the investing landscape.
The spike in the VIX volatility index above 30% yesterday and this past week are significant indicators of a more bullish outcome. Moreover, they’re warning in a good sort of way, for investors that can keep their wits about them, of an opportunity to buy extremely oversold stocks with greater confidence.
To be fair, things could always get worse. We still have the official one-year anniversary of last year’s climatic bottom on March 23 that’s a couple weeks out. And history has been known to repeat. More often though, it simply rhymes. As much and in the following let’s explore three extremely oversold stocks to buy which should help get investors through either the next end of days or another Roaring ‘20’s still to come.
Source: Charts by TradingView
The first of our oversold stocks to buy are shares of Tesla. You or your neighbor probably have one parked in your driveway these days. Moreover, Tesla has driven its business to new heights over the past year during a pandemic when folks are tightening their wallets, working from home, staying socially-distanced and nesting. If that’s not a testament to Tesla’s staying power, what is?
Technically, the EV and battery behemoth has taken it on the chin during Wall Street’s abrupt shifting of gears. With this week’s sell-off, shares have corrected 40%. It’s a lot. But the other reality is declines of 30% in a healthy market are common for a stock of TSLA’s caliber.
Bottom-line, given the acceptable punishing overkill in Tesla shares, as well as this oversold stock now parked squarely in trendline and Fibonacci price support—it’s time to buy.
Favored Strategy: Modified April $700 call / ($550/$400 put) Collar
Source: Charts by TradingView
C3.AI is the next of our oversold stocks to buy. Like with Tesla, AI is another tech giant. C3.AI is also the only pure play artificial intelligence stock in the market today. To be fair, in days past C3.AI was hailed as the market’s “Priciest Tech Stock” by Barron’s. But these days, those issues are less of a problem.
Shares of AI have crumbled roughly 50% from the late December levels when Barron’s warning came out. More recently, about 20% of the loss has been helped by a mixed earnings report out on Monday, which still offered better-than-forecast sales growth and above-views revenue guidance.
Technically, the culmination of all the selling pressure has worked its way into a lifetime low for one of 2020’s hottest IPO’s and a double-bottom pattern that could be completing with an icing on the cake style, bullish hammer candlestick.
Favored Strategy: Modified April $125 call / ($85/$65 put) Collar
Source: Charts by TradingView
The ARK Innovation exchange-traded fund is the last of our oversold stocks to buy. Led by the media-friendly, talented and outspoken Cathie Wood, the fund burst onto investors’ radars in triumphant style with gains of 150% in 2020. But in hindsight, sometimes paybacks can be a you-know-what.
After a rousingly strong start to 2021, the fund’s return of more than 28% at its mid-February peak has been quickly erased. In fact, a correction of 33% in less than three weeks now has ARKK underwater for the year. But this is no easy-come, easy-go situation which has seen its best days already.
The actively-managed, concentrated growth fund with top holdings in Tesla, Roku (NASDAQ:ROKU), Square (NYSE:SQ) and a total portfolio of just 56 stocks is here to stay. Well, maybe not right here to stay, as this oversold stock is offering today’s top growth stock stories on sale at extremely attractive levels.
Technically, shares of this oversold stock have broken beneath an uptrend line tied to the novel coronavirus bear market bottom from last March. ARKK has also breached the 38% retracement level. It’s a little concerning, but today’s overly fearful environment can’t be denied either. Also, stochastics is entering oversold levels. It’s another good sign the end is near, in a more optimistic sort of way.
Lastly, given the size of ARKK’s correction and it’s relationship to what growth stocks typically do all the time, before rallying to even higher prices, this oversold stock has a lot working in its favor. And for today’s investors that translates into the fear of missing as being of unspoken importance in today’s market environment.
Favored Strategy: April $140 Call / ($105/$80 Put) Modified Collar
On the date of publication, Chris Tyler holds, directly or indirectly, positions in C3.AI (AI), ARK Invest Funds (ARKK, ARKG) and their derivatives, but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
The post Fear Not Buying These 3 Oversold Stocks Today appeared first on InvestorPlace.
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