Backtesting 10 Oversold Stocks With a History of Rebounding Strongly

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 |  Includes: CHRW, DCI, IBKR, LUK, NTAP, SPLS, TDS, TGT, WIN, WMS-OLD
by: Kapitall

If you're looking for a few stocks to trade on a rebound, the following list might offer an interesting starting point.

The following is a list of oversold stocks, as defined by the Relative Strength, or RSI(14), indicator. All of the stocks mentioned below have RSI(14) levels below 40, which usually signals oversold conditions.

To understand the significance of the RSI(14) indicator, we also backtested a simple trading strategy to see how these stocks have previously reacted to these trading levels. The strategy is discussed below. (You can access the complete backtested results by clicking here.)

RSI(14) and short float data sourced from Finviz, backtesting done with StrategyDesk.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.

Backtested Strategy: Buy 100 shares of the stock when the RSI(14) indicator drops below 30, and sell when the RSI(14) indicator rises above 50. No trailing stops.

1. CH Robinson Worldwide Inc. (NASDAQ:CHRW): Air Delivery & Freight Services Industry. Market cap of $11.74B. RSI(14) at 28. Short float at 6.59%, which implies a short ratio of 8.39 days. The stock has gained 34.41% over the last year.

Backtested Results For CHRW: Over the last 5 years, the RSI(14) alert was triggered 4 times. Trading the above-mentioned strategy resulted in 4 winners and 0 losers (100% success rate). The strategy returned 39.98%, lower than the buy and hold return of 81.05%.

2. Donaldson Company, Inc. (NYSE:DCI): Pollution & Treatment Controls Industry. Market cap of $4.21B. RSI(14) at 30.91. Short float at 2.41%, which implies a short ratio of 7.2 days. The stock has gained 34.68% over the last year.

Backtested Results For DCI: Over the last 5 years, the RSI(14) alert was triggered 9 times. Trading the above-mentioned strategy resulted in 9 winners and 0 losers (100% success rate). The strategy returned 64.72%, higher than the buy and hold return of 63.25%.

3. Interactive Brokers Group, Inc. (NASDAQ:IBKR): Investment Brokerage Industry. Market cap of $653.99M. RSI(14) at 22.41. Short float at 3.84%, which implies a short ratio of 3.79 days. The stock has lost -7.63% over the last year.

Backtested Results For IBKR: Over the last 5 years, the RSI(14) alert was triggered 5 times. Trading the above-mentioned strategy resulted in 5 winners and 0 losers (100% success rate). The strategy returned 95.23%, higher than the buy and hold return of -50.51%.

4. Jefferies Group Inc. (JEF): Investment Brokerage Industry. Market cap of $4.19B. RSI(14) at 25.85. Short float at 7.71%, which implies a short ratio of 16.18 days. The stock has lost -5.3% over the last year.

Backtested Results For JEF: Over the last 5 years, the RSI(14) alert was triggered 6 times. Trading the above-mentioned strategy resulted in 6 winners and 0 losers (100% success rate). The strategy returned 79.33%, higher than the buy and hold return of -10.88%.

5. NetApp, Inc. (NASDAQ:NTAP): Data Storage Devices Industry. Market cap of $18.3B. RSI(14) at 28.73. Short float at 4.78%, which implies a short ratio of 3.32 days. The stock has gained 69.76% over the last year.

Backtested Results For NTAP: Over the last 5 years, the RSI(14) alert was triggered 8 times. Trading the above-mentioned strategy resulted in 7 winners and 1 loser (87.5% success rate). The strategy returned 16.45%, lower than the buy and hold return of 66.63%.

6. Staples, Inc. (NASDAQ:SPLS): Specialty Retail Industry. Market cap of $15.13B. RSI(14) at 28.96. Short float at 2.16%, which implies a short ratio of 1.92 days. The stock has lost -17.21% over the last year.

Backtested Results For SPLS: Over the last 5 years, the RSI(14) alert was triggered 7 times. Trading the above-mentioned strategy resulted in 6 winners and 1 loser (85.71% success rate). The strategy returned 29.65%, higher than the buy and hold return of -9.24%.

7. Telephone & Data Systems Inc. (NYSE:TDS): Wireless Communications Industry. Market cap of $3.41B. RSI(14) at 15.71. Short float at 2.31%, which implies a short ratio of 9.74 days. The stock has gained 5.49% over the last year.

Backtested Results For TDS: Over the last 5 years, the RSI(14) alert was triggered 3 times. Trading the above-mentioned strategy resulted in 3 winners and 0 losers (100% success rate). The strategy returned 28.56%, higher than the buy and hold return of -1.36%.

8. Target Corp. (NYSE:TGT): Discount, Variety Stores Industry. Market cap of $35.59B. RSI(14) at 21.1. Short float at 1.04%, which implies a short ratio of 1.11 days. The stock has gained 0.28% over the last year.

Backtested Results For TGT: Over the last 5 years, the RSI(14) alert was triggered 6 times. Trading the above-mentioned strategy resulted in 6 winners and 0 losers (100% success rate). The strategy returned 45.11%, higher than the buy and hold return of -7.35%.

9. Windstream Corporation (NASDAQ:WIN): Telecom Services Industry. Market cap of $5.9B. RSI(14) at 26.36. Short float at 3.23%, which implies a short ratio of 3.08 days. The stock has gained 29.93% over the last year.

Backtested Results For WIN: Over the last 5 years, the RSI(14) alert was triggered 7 times. Trading the above-mentioned strategy resulted in 6 winners and 1 loser (85.71% success rate). The strategy returned 24.18%, higher than the buy and hold return of 3.74%.

10. WMS Industries Inc. (NYSE:WMS-OLD): Recreational Goods Industry. Market cap of $2.3B. RSI(14) at 28.61. Short float at 6.96%, which implies a short ratio of 4.88 days. The stock has gained 4.15% over the last year.

Backtested Results For WMS: Over the last 5 years, the RSI(14) alert was triggered 8 times. Trading the above-mentioned strategy resulted in 8 winners and 0 losers (100% success rate). The strategy returned 77.75%, lower than the buy and hold return of 124.61%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.