1/4/2019 10 Oversold Stocks Due for a Bounce

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0 Oversold StocksWe live in turbulent times. One day, the market decides to post its
worst Christmas Eve performance ever. Two days later, the Dow
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ue for a Bounce Jones Industrial Average posts its first-ever 1,000 point rally. Recently Viewed

Luke Lango Such is the nature of volatility. Up big one moment. Down big the Symbol Last Price Change % Cha

InvestorPlace January 3, 2019 next. For long-term investors, this volatility is little more than noise.
NVDA 136.19 +8.20 +6.4
NVIDIA Corporation
But for short-term traders, there is opportunity in this noise. This
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extreme volatility often results in huge dips that push stocks into near- Stitch Fix, Inc.
term oversold territory. Those dips are worth buying. On the other
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end, the extreme volatility can also often result in huge rallies that Amazon.com, Inc.
push stocks into near-term overbought territory. Those rallies are
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worth selling. Snap Inc.

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As such, for short-term traders, this is simultaneously a “buy the dip”

and “sell the rally” market.

10 Top Stock Picks From the Street's Best Analysts

With that in mind, and with the market still flirting with bear-market
territory, let’s take a look a 10 oversold stocks that are due for a
bounce. 3 Biopharma Stocks to Buy for Their Robust
Dividend Yields
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Facebook (FB)

7 Downtrodden Stocks to Fish From the Bott

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Oversold Stocks Due For A Bounce: Facebook (FB)

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1/4/2019 10 Oversold Stocks Due for a Bounce
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The problems plaguing Facebook (NASDAQ:FB) started much 8 Cheap Value Stocks That Just Got More
Enticing
Finance Home Watchlists earlier thanScreeners
My Portfolio the broad market sell-off Industries
Markets in October. Indeed,
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stock peaked in late July. All this recent sell-off has done is
exacerbate what are very fixable problems and create a compelling
buying opportunity for investors and traders.

The fundamentals underlying Facebook stock remain very strong.

There are lots of concerns about bad press, usage, regulation, and
the overall health of the company’s digital advertising business. But,
all that really matters here is users and advertisers. Users are still
going up. Advertisers are, too. Thus, the digital ad business looks well3 Earnings Reports to Watch Next Week,
positioned to surprise investors with healthy performance over the Including Aphria Stock
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next several quarters, and upside performance herein should drive
FB stock higher.

On a technical basis, Facebook’s Relative Strength Index (RSI) has

spiked recently, but, it has spent a great deal of time flirting with sub-
30 oversold territory in late 2018. Most dips down to oversold territory
have resulted in quick albeit unsustainable rallies. Nonetheless, for
short-term traders, the signal here is for the RSI to drop back to below
30. That is the near-term buying point in this oversold stock.
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Under Armour (UAA)

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in Israel and India
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Oversold Stocks Due For A Bounce: Under Armour (UAA)

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Athletic apparel company Under Armour (NYSE:UAA) actually had a

raceAhead: The 116th Congress Is the Most
good 2018. UAA stock gained more than 22% through the year, Diverse in History
powered by stabilized growth in the North America business and an Fortune

improving margin profile. But a disappointing Investor Day which

included unexciting five-year targets has resulted in a 27% sell-off in
UAA stock over the past month.

The fundamentals here aren’t great, but they aren’t that bad either.
The athletic apparel space is red-hot, but also ultra competitive. You
have Nike (NYSE:NKE), Adidas (OTCMKTS:ADDYY), Skechers
(NYSE:SKX), and others going after the athleisure market with varied
success. Trump Says He Can Use Emergency Power to
Build Border Wall
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Consequently, the company is forgetting about that market, and

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doubling down onoritscompanies
performance emphasis. While this move
eliminates the potential for huge upside in UAA stock through limiting
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the addressable market, Markets Industries
it also creates a pathway Videos Reporters
for steady and
healthy growth in its core performance market. At current levels, UAA
stock is undervalued considering that healthy growth pathway,
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implying room for a fundamentally driven rally in 2019.
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7 Stocks to Sell In January

On a technical basis, the recent sell-off has plunged Under Armour

into oversold stock territory with its RSI below 30. Indeed, today’s RSI
is the lowest it has been since late 2017. Back then, UAA stock was
bottoming after a huge sell-off. A similar dynamic could be playing out
this time around.

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bellwether
Lululemon (LULU)
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Oversold Stocks Due For A Bounce: Lululemon (LULU)

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Staying in the athletic apparel space, perhaps the hottest name in the
whole category has been Lululemon (NASDAQ:LULU). Powered by
several consecutive quarters of near-20% comparable sales growth Powell Says He Wouldn’t Resign at Trump’s
Request
and improving margins, LULU stock has risen more than 50% this
Bloomberg
year. But, at one point in time, LULU stock was up essentially 100%
year-to-date.

The fundamentals don’t support the recent 25% sell-off in LULU

stock. The Street is concerned about what was a tepid fourth-quarter
guide that called for comparable sales growth deceleration from
~20% in the prior three quarters to ~10% in the holiday quarter. But it
looks like management just sandbagged the guide. This was a record
holiday season for retail, and Lululemon appears to be at the center
of this record season. As such, fourth quarter numbers should
surprise investors, and power LULU stock higher in early 2019.

From a technical standpoint, LULU stock isn’t oversold right now. But,
with the RSI hovering around 50, it is just one big drop away from
falling into oversold stock territory. In this turbulent market, a big drop
could happen any day. Investors should be ready to buy that dip.

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Oversold Stocks Due For A Bounce: Amazon (AMZN)

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In big tech, few stocks have been hit harder than e-commerce and
cloud giant Amazon (NASDAQ:AMZN). Once thought to be the
unstoppable poster child of growth and momentum, Amazon stock
briefly hit the $1 trillion valuation mark in mid-2018. Then, things
started to fall apart. Amazon stock has since shed as much as 34%.

Despite the huge sell-off, the fundamentals supporting Amazon stock

remain favorable in a long-term window. There are a myriad of growth
drivers, each of which present multi-billion-dollar growth opportunities
for the company over the next several years. Despite slowing growth,
Amazon still dominates e-commerce, and judging by e-commerce’s
near 20% growth this holiday season, this whole space still has a ton
of firepower left for further growth.

Meanwhile, Amazon also dominates the cloud, which is a secular

growth market that could actually see growth accelerate during a
slowdown as enterprises try to cut costs. There’s also the digital
advertising business, which is growing by 100%-plus year-over-year,
and the nascent hardware and AI businesses. Pus, you have the
offline retail business, the logistics business and the pharmaceutical
business. Between all of these growth verticals, Amazon stock still
has a enough growth firepower to justify a premium valuation.

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On the technical side of things, you have a stock which has plunged
30% in a hurry. The stock is oversold. Sentiment is poor. Trading
action is bearish. But, the fundamentals remain strong, and this
divergence can’t last forever.

Target (TGT)

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Oversold Stocks Due For A Bounce: Target (TGT)

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Source: Mike Mozart via Flickr (Modified)

Big tech has been hit hard during the market sell-off. So has big retail.
Alongside a sliding retail sector, retail giant Target (NYSE:TGT) has
dropped 30% off its highs over the past several months.

In comparison to the fundamentals, this sell-off seems grossly

overdone. Target has reinvented itself as a omni-channel retailer with
a stable offline business and a red-hot online business. The company
is also doing everything right on the product and pricing fronts to
make sure that their stores are relevant to the American consumer. As
such, Target has put itself in a position such that so long as the U.S.
consumer is healthy, Target will put up good numbers. There have
been fears on Wall Street about a slowing economy, but such fears
haven’t hit Main Street. The U.S. consumer still has sky high
confidence and bullish sentiment, is getting paid more than ever, and
spent a whole bunch more this holiday season. Thus, the consumer is
still strong, meaning Target should still be strong, too.

On the technical side, Target stock’s RSI has dropped to near-

oversold territory, and is just one big drop away from being in
oversold territory. That just doesn’t make sense given that the
company is reporting decade best numbers against the backdrop of
an extremely healthy U.S. consumer. As such, this disconnect should
fix itself in 2019. That fixing process will push Target stock materially
higher.

Netflix (NFLX)

Oversold Stocks Due For A Bounce: Netflix (NFLX)

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Back in the big tech world, one of the biggest losers during the recent
sell-off has been streaming giant Netflix (NASDAQ:NFLX). A
combination of macro headwinds (slowing global growth and trade
war headwinds) and micro headwinds (increasing competition and
rising rates on a debt-loaded balance sheet) have dragged Netflix
stock 35% lower since July.

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escalating headwinds, a 40% sell-off seems to overstate this

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company’s risks while understating its growth potential. At its core,
Netflix is a streaming giant who, through a portfolio of compelling
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original content, has builtMarkets IndustriesrisingVideos
a moat to withstand Reporters
competition. As
such, the only thing Netflix needs to keep growing at a healthy rate is
continued global adoption of streaming services. This should happen,
even in a slowing economy, because streaming offers a plethora of
cost and convenience advantages. Thus, even if the global economy
comes to a screeching halt in 2019, Netflix should still be able to grow
its sub base at a healthy rate, and that should ultimately power NFLX
stock higher from today’s depressed levels.

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With respect to the technicals, NFLX stock is teetering on the edge of

oversold territory. Drops in the RSI to 30 have historically been near
term bottoms. This stock is just one big drop away from the RSI
hitting 30. As such, this stock is just one big drop away from yet
another near term bottom.

Costco (COST)

Costco Stock May Be the Market’s Top Recession Pick

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No one has been spared in the recent market sell-off, not even stable
growth giant Costco (NASDAQ:COST). Over the past decade,
Costco stock has dropped nearly 20% or more just twice. Once was
during the 2008 Financial Crisis. The other time is today.

From a fundamental standpoint, that doesn’t make much sense. Back

during the 2008 Financial Crisis, unemployment rates were high and
rising, the consumer was weak, sales at Costco were sluggish,
margins were under significant pressure, and earnings were falling in
a big way. You don’t have any of that today. Instead, unemployment
rates are low and falling. The consumer is very strong. Comparable
sales growth at Costco is as good as its been in recent memory.
Margins are under pressure, but only fractionally so compared to
2008. Earnings are still rising. Thus, the fundamentals simply do not
support a 20% drop in Costco stock. As soon as sentiment shifts, this
stock should bounce back in a big way.

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(RSI below 30). This stock tends to do that only about once a year.
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Each time, such drops into technically oversold territory tend to signal
a bottom, and Costco stock rallies in a big way off that bottom.
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Apple (AAPL)

Oversold Stocks Due For A Bounce: Apple (AAPL)

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For a while, consumer electronics giant Apple (NASDAQ:AAPL) was

impervious to the market sell-off. Then, the company reported sub-
par numbers in early November. That was followed by rare and
sizable guidance cut in early 2019. All together, Apple stock has shed
nearly 40% in just a few months.

The fundamental concerns here make sense. Everyone is worried

about “peak iPhone” with global smartphone demand drying up due to
global saturation and emerging market weakness. Indeed, the main
culprit behind Apple’s big first quarter guidance cut was slower-than-
expected iPhone sales in China.

That’s a big deal. The iPhone still represents about 60% of Apple’s
revenues, meaning that roughly 60% of Apple’s business is stalling
out. But, the other 40% is red-hot. Non-iPhone sales in the first
quarter rose nearly 20%, led by robust growth in the Services and
Wearables businesses.

These businesses will keep growing because Apple’s installed based

is only getting bigger. The iPhone business will keep stalling because
global smartphone demand is drying up. That combination should be
enough to power decent high single digit to low double digit earnings
growth for the foreseeable future. That level of growth, coupled with a
paltry 10X forward earnings multiple, should produce attractive
returns from here.

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Technically speaking, it looks like Apple stock is near a bottom. There

have been two big iPhone-slowdown drops in Apple stock over the
past decade (2012-13 and 2015-16). On average, they wiped out
about 35% of the stock’s value. Apple stock is hovering at a 38%
peak-to-trough decline today. Thus, history implies that we could be
near or at a bottom.

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Roku
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Oversold Stocks Due For A Bounce: Roku (ROKU)

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There have been some big losers during the recent market sell-off.
Then there’s Roku (NASDAQ:ROKU). The market’s recent 20% drop
has not been kind to the streaming device maker. Once a red-hot
company loved by investors and analysts alike, ROKU stock is now
the opposite. In just three months, this stock has lost 57% of its value.

This sell-off is overdone, and ignores Roku’s secular growth catalysts.

This is a company which makes streaming devices which enable
consumers to watch a myriad of streaming services.

The simplest way of understanding Roku is as the cable box for the
streaming world. Granted, this space has a ton of competition and
mostly everyone already has smart TVs. But, Roku is already the
market leader with runaway 40% share in streaming players, and they
are also the leader in the smart TV market with 25% share. Thus, all
Roku needs to do to guarantee itself huge growth is robust global
growth from the streaming market.

Considering there are over 4 billion internet users in the world and
just 400 million streaming subscription subscribers, it looks like the
streaming growth narrative will persist with great momentum for the
foreseeable future. As such, Roku should sustain big growth.

From a technical standpoint, ROKU stock is well into oversold

territory with its RSI below 30. Such bearish sentiment simply won’t
hang around forever in a stock has has strong streaming growth
catalysts. Thus, this is one overwold stock that looks due for a big
bounce-back in early 2019.

Alphabet (GOOG, GOOGL)

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My Portfolio Due For A Bounce:
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Of the widely followed FANG names, one has been significantly more
resilient than the others during this late 2018 market sell-off:
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). While its FANG
peers are 30% or more off their recent highs, GOOG stock is just
20% off its recent high. But, this stock is still in bear market territory
with an RSI hovering near oversold territory.

This weakness in GOOG stock should be perceived as an

opportunity. This is a secular growth company that has established
itself as the backbone of the internet. As such, so long as internet
usage picks up globally, Google’s advertising business will continue
to grow at a healthy rate. Plus, this company has plenty of additional
and new growth drivers through the cloud, autonomous driving, smart
home and hardware. Between all these growth catalysts, Alphabet
has plenty of growth potential over the next several years. At a
multiyear-low 20 forward earnings multiple, GOOG stock isn’t priced
for this growth potential.

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From a technical standpoint, the $1,000 level is the critical level to

watch. The stock has shown resilience around this level before. As
such, dips to $1,000 should be viewed as buying opportunities for
short-term traders.

As of this writing, Luke Lango was long FB, UAA, NKE, SKX, LULU,
AMZN, TGT, NFLX, COST, AAPL, ROKU, and GOOG.

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