If you're on the prowl for cheap stocks to buy in the hope of a quick bounce, Bespoke Investment Group has an intriguing approach: They took the S&P 1500 and looked for stocks over the past three years that have consistently risen higher a week after reaching oversold levels. They then assembled a top 10 list of stocks that are currently oversold and typically go up.
For example, Coca-Cola Co. tops the list. The stock is 2.84 standard deviations below its 50-day moving average, after the stock fell 14 per cent from its high this year. But over the past three years, the stock has risen on average 1.1 per cent in the week after reaching this oversold level. It has shown this pattern a convincing 85.7 per cent of the time.
The other stocks on the top 10 list include: MEMC Electronic Materials, Constellation Energy Group, Bard C.R. Inc., Hospira Inc., Reynolds American Inc., Colgate Palmolive, Staples Inc. and Cincinnati Financial.
