This Indicator Says It's Time To Sell Lowe's Stock

Shares of Lowe's Companies, Inc. LOW have made a nice move higher over the past few weeks, but the rally may be in jeopardy. The stock has become overbought.

Many computerized trading algorithms are based on probability theory and it states that 95% of all trading should be within two standard deviations of the mean or average. If a stock exceeds this threshold, these algorithms will be expecting a reversion to the mean.

On the following chart, the red line is two standard deviations above the 20-day moving average price. Since March, the price has traded above it three times, and each time was followed by a selloff.

Now Lowe's is trading above this important threshold again. There’s a good chance it sells off once more.