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What makes a tech stock a "top rated"?
How about a historical trend of being more than 8 times higher than the average stock in a week's time?
Based on our research, which involved millions of simulated trades between 1995 and 2006, we found that there were certain stocks in certain conditions that, after five days, were likely to outperform the average stock. And not just outperform, but to do by significant margins.
These conditions involved measurements of momentum, trend, volatility and volume. Those measurements allowed us to quantitatively rate stocks based on the likelihood of their outperformance in the short-term trader's "sweet spot" of 5 to 8 days.
The best performing stocks were given ratings of 8, 9 or 10. The worst performing stocks--those stocks that were likely to underperform the average stock--received ratings of 3, 2 or 1.
These ratings, PowerRatings, provide short-term traders with an excellent tool both for selecting stocks for possible trades as well as a filter for potential trading opportunities produced from your own trading system.
Because traders are always looking at technology stocks, here are a sample of four of our "top rated" stocks in the technology sector. All of these stocks have Short Term PowerRatings of at least 8. According to our research, stocks with Short Term PowerRatings of 8 or better outperformed the average stock by more than 8 to 1 after five days.
Importantly, I have screened our high PowerRating technology stocks for one key factor: all of the four in today's discussion are trading above their 200-day moving average. As Larry Connors, founder and CEO of TradingMarkets wrote late last year in a widely-circulated article, "5 Mistakes to Avoid in a Market Trading Below its 200-day Moving Average" traders need to stick to the strict discipline when the markets are under pressure. Part of that strict discipline includes only buying stocks that are above their 200-day moving averages, and only selling short stocks that are below their 200-day moving averages.
We have found that when the broader markets--the Dow Industrials, the S&P 500, the Nasdaq--are under their 200-day moving averages, there is no consistent edge in buying stocks that are also under their 200-day moving averages.
Let's meet the stocks.
Photon Dynamics (PHTN | Quote | Chart | News | PowerRating) has a Short Term PowerRating of 9.
CyberSource (CYBS | Quote | Chart | News | PowerRating) has a Short Term PowerRating of 8
Cree Inc. (CREE | Quote | Chart | News | PowerRating) has a Short Term PowerRating of 8
ANSYS Inc. (ANSS | Quote | Chart | News | PowerRating) has a Short Term PowerRating of 8
David Penn is Senior Editor at TradingMarkets.com.
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The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
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