Yesterday the Dow dropped 1.96%. The 20 day moving average is about 240 points below the 50 day MA. This doesn’t mean it’s a bad time to trade; quite the opposite.
Through extensive backtesting of the performance of all stocks traded on the major US markets over the last 11 years, we have determined that, if you buy a stock at random in the current market condition, you have a 54% chance of making a profit in 20 days. In conditions like these, historically the odds have been stacked in your favor, but only slightly.[BANNER]
However, If you narrow your area of stock selection down to the big liquid companies and search for companies with MACD Readings well below the zero line, and RSI readings of less than 30%, the historical backtest rates since the year 2000 get a lot prettier.
Since the year 2000, this exact setup has occurred only 7432 times, and 66.13% of the stocks went higher in 20 days. So, what matches this today? There are only 6 stocks, but the one I want to talk about is Teva (NYSE:TEVA).
Teva Pharmaceutical Industries Limited (NYSE:TEVA) is a multi-billion dollar pharmaceutical giant engaged in the development, manufacture and sale of generic drugs.
The company has reported significant revenue growth overt the last three years, reaching more than $18 billion for 2011. Although the EPS dropped in the first quarter of 2012, over the last four quarters, Teva has managed to beat the EPS estimates consistently by 1 to 3 cents. The estimates for the end of 2012 are much higher, and the low price target given by analysts is $42.
