5 Oversold Stocks Ready for a Bounce Higher

NEW YORK ( TheStreet) -- As overwhelming as it may be at times, acquiring stocks when they are loathed by others demonstrates an aptitude to detach sensation from logic. Companies become oversold when emotion takes over in the market and thrusts the prices lower.

The desire to escape the agony of additional losses, results in many selling at the particular instant they should buy. Of course, occasionally stocks become oversold as a result of proper money-management stop-losses triggered. Having a stop loss is vital to investing survival and your exit plan must be put in place before considering an entry.

Typically, stocks do not become oversold on a daily or weekly timeframe because of stop-losses triggered. It's more often the result of emotion dictating selling, and emotional selling sets up our opportunity.

Here is a list of five candidate stocks oversold on my charts. My ideal technique to exploit the feebleness is to sell put options or write covered calls (pretty much the same thing). The typical trade lasts three to four weeks.

TTWO Chart TTWO data by YCharts

Take-Two Interactive Software (TTWO).
Take-Two Interactive Software is a leading worldwide developer, publisher and distributor of interactive software games. Take-Two Interactive trades an average of 2.4 million shares per day with a marketcap of $884 million.

52 Week Range: $8.89 to $16.27
Book Value: $6.60
Price to Book: 1.38

Ten (over 70%) out of 14 analysts rate TTWO a "buy" or strong buy. The company has four "holds," and none of the analysts give a sell rating. Shareholders have not been rewarded for their patience, shares have fallen 30.7% in the last year, and the average analyst target price for TTWO is $18.19.

Take-Two is anticipated to report weak earnings after the market closes on July 31. The consensus estimate is currently a loss of 78 cents a share, a decline of 71 cents from a loss of 7 cents during the same period last year.

The mean fiscal year estimate price-to-earnings ratio is 5.08, based on earnings of $1.81 per share this year. In the last month the stock has fallen -10.07%. Shares are below the 200-day moving average and the moving averages place Take-Two in a strikingly bearish trend.

For the same fiscal period year-over-year, revenue has declined to $1.14 billion last fiscal year compared to $1.16 billion in the previous year. The bottom line has rising earnings year-over-year of $48.45 million last fiscal year compared to $-122.99 million in the previous year.

Short interest is very high at 17.44% and may provide the fuel for a massive short squeeze if Take-Two can deliver during earnings.

Take-Two is oversold on the weekly and daily charts and is due for a technical bounce. The best way I have found for playing oversold stocks is to write put options. Writing put options lowers positional risk and compensates for both time and favorable directional movements.

I like the August $9 put this week during the next few days for 50 cents or greater. My profit target is 40 cents or close out on option expiration date.

F Chart F data by YCharts

Ford Motor Company (F)

Ford produces cars and trucks. Ford trades an average of 34.2 million shares per day with a marketcap of $35.7 billion.

52 Week High: $13.31
52 Week Low: $9.13
Book Value: $4.33
Price To Book: 2.14

The average analyst target price for Ford is $14.64. Short interest is not very high at 3.62%

The trailing 12-month price-to-earnings ratio is 5.5, the mean fiscal-year estimate price-to-earnings ratio is 7.06, based on earnings of $1.33 per share this year. Investors are receiving 20 cents in dividends for a yield of 2.13%.

In the last month the stock has fallen -11.93%. Most of the loss is a result of weak European sales and losses. North America continues to perform and Asia is ramping up.

Investors have been rewarded with an increase of year-over-year revenue. Revenue reported was $120.90 billion last fiscal year compared to $118.30 billion in the previous year. The bottom line has rising earnings year-over-year of $6.56 billion last fiscal year compared to $2.72 billion in the previous year.

Ford is oversold on the weekly and daily charts and is due for a technical bounce. The best way I have found for playing oversold stocks is to write put options. Writing put options lowers positional risk and compensates for both time and favorable directional movements.

I like the August $9 put this week during the next few days for 23 cents or greater. My profit target is 20 cents or close out on option expiration date.

ROVI Chart ROVI data by YCharts

Rovi (ROVI) is a technology company specializing in solutions for delivering media. The stock trades an average of 4.8 million shares per day, giving the company a marketcap of $1.3 billion.

52 Week High: $58.19
52 Week Low: $10.01
Book Value: $15.41

The trailing 12-month price-to-earnings ratio is 7.9, the mean fiscal-year estimate price-to-earnings ratio is 5.19, based on earnings of $1.93 per share this year.

In the last month the stock has fallen -54.06%, and the average analyst target price for ROVI is $22.10.

Management has provided an improvement of year-over-year revenue. Revenue reported was $541.49 million last fiscal year compared to $483.91 million in the previous year. The bottom line has rising earnings year-over-year of $212.88 million last fiscal year compared to $-52.95 million in the previous year.

Short interest is relatively low at 2.74% and indicates smart money is not pouncing on the shares.

Rovi is beginning to work off a major gap down. Top and bottom lines numbers have not impressed investors. Rovi is a chap oversold stock that has the ability to move much higher but I will focus on profiting from option premium.

Rovi is oversold on the charts and is climbing out of a very large gap down in price. The best way I have found for playing oversold stocks is to write put options. Writing put options lowers positional risk and compensates for both time and favorable directional movements. I expect Rovi to take a lot of time to move higher. Selling put options will pay us for waiting.

I like the August $10 put this week during the next few days for 25 cents or greater. My profit target is 20 cents or close out on option expiration date.

KEG Chart KEG data by YCharts

Key Energy Services (KEG) operates on-shore oil rigs and supplies oil rig equipment. The stock trades an average of 3.1 million shares per day giving the company a marketcap of $1.1 billion.

52 Week High: $20.48
52 Week Low: $6.67
Book Value: $7.90

Analyst opinion is mixed with this company. Most of the analysts surveyed don't believe a buy or a sell is currently warranted. Right now, Key has six buy recommendation out of 13 analysts covering the company and seven holds; no analysts recommend selling. The average analyst target price for Key is $11.86.

The trailing 12-month price-to-earnings ratio is 7.1, the mean fiscal-year estimate price-to-earnings ratio is 7.96, based on earnings of $.95 per share this year.

In the last month the stock has fallen -22.37%. Their loss is your gain. The next level of serious overhead resistance is at $9.40.

For the same fiscal period year-over-year, revenue has improved to $1.15 billion last fiscal year compared to $1.08 billion in the previous year. The bottom line has rising earnings year-over-year of $73.49 million last fiscal year compared to $-156.12 million in the previous year.

Short interest is high at 7.65%.

Key is oversold on the charts. I like the August $7.5 put this week during the next few days for 55 cents or greater. My profit target is 45 cents or close out on option expiration date.

TC Chart TC data by YCharts

Thompson Creek Metals (TC)

Molybdenum miner and processor Thompson Creek Metals trades an average of 3.5 million shares per day with a marketcap of $479 million.

52 Week High: $10.01
52 Week Low: $2.54
Book Value: $10.47

The average analyst target price for TC is $6.73.

The trailing 12-month price-to-earnings ratio is 7.9, the mean fiscal-year estimate price-to-earnings ratio is 159.38, based on earnings of $.02 per share this year. In the last month the stock has fallen -24.93 percent.

The company has rising revenue year-over-year of $594.80 million last fiscal year compared to $373.4 million in the previous year. The bottom line has rising earnings year-over-year of $113.70 million last fiscal year compared to $-56.00 million in the previous year.

Short interest is very high at 14.41% and is the biggest warning flag to avoid the stock. I like the August $4 call options this week during the next few days for 10 cents or greater. My profit target is 10 cents or close out on option expiration date.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.