Shares of Walt Disney Co (NYSE:DIS) are extremely oversold, which means it may be time to buy.
What To Know: Most trading in the stock market is done by computerized algorithms. And most of these algorithms are based on probability theory.
The theory suggests that 95% of all trading should occur within two standard deviations of the mean or average. If a stock exceeds the two standard deviation threshold, either up or down, there’s a good chance that the algorithms target it. They will be expecting a reversion to the average.
Why It’s Important: Since June, shares of Disney have dropped below two standard deviations of the 20-day average price and two different occasions. Both times were followed by a reversion or rally.
Disney is trading below this critical threshold again and there’s a chance another rebound follows.
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