Oversold Stock of the Day: Vedanta Limited (VDEL)
Indian metals and mining company Vedanta (VEDL) has reached oversold levels. Shares have fallen in recent sessions as the company’s plan to delist from a number of stock exchanges has failed.
The delisting program would have reduced the costs of being a publicly-traded company and freed up capital for other uses. But without enough shares tendered, the company is stuck paying those costs for now.
That development has caused shares to shed much of their gains from the past month. From a price near $7.50, the company’s shares have dropped into the mid-$5 range, for a loss of nearly one-third.
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Naturally, that’s leading to oversold conditions. Shares have dropped below both their 50- and 200-day moving averages. The company’s relative strength index has hit a reading of 21, as shares gapped lower on Monday.
Action to take: Shares are oversold, suggesting that the selloff may be nearing an end as traders who want to exit the trade do so.
The March 2021 $5 calls are in-the-money, for now, and have a bid/ask spread near $1.30. That’s an inexpensive bet that could more than double in value if shares shake off the selloff and get back to their hold highs near $7.50 in the next 5 months. Traders should look for a bounce to take profits quickly.