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Exchanges receiving a beating, is it time to buy?

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The exchange stocks have been hot issues in the past few quarters as investors have been betting on increased trading activity from hedge funds, higher volatility, and so on.

But just this week, exchange stocks have received a beating harder than the markets as a whole. I believe that if a snapback rally occurs next week, these stocks should bounce back harder than the overall market. Two particular exchange stocks have appealing charts: CME Group (NYSE: CME) and NYSE Euronext (NYSE: NYX). Both of these charts display similar characteristics, as you can see below:

Both of these charts have two very similar and appealing aspects: 1) Established support that was held in Friday's trading; and 2) an oversold condition as displayed by the stochastic indicator.

What does this mean? Essentially, both of these stocks have above-average probabilities of bouncing next week. However, due to extreme downward momentum displayed by the market during this week I think that you should wait for confirmation of holding support and some strength. For example, if either stock is rallying off the support level on Monday and showing modest gains, it would be logical to assume the stock had "more bounce" left.

Whenever the market gets hit hard, opportunities arise. Although each of these ideas probably will fair poorly if negativity dominates the market place next week, if there is any optimism both of these stocks should bounce back quite nicely.

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IndexesChangePrice
DJIA+132.7910,450.95
NASDAQ+29.972,176.01
S&P 500+14.861,106.24

Last updated: November 23, 2009: 05:26 PM

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