Today's edition of PowerRatings Good Bad and Ugly features one stock that began and ended the day with a high PowerRating, and two stocks that had significant PowerRatings downgrades after Wednesday's impressive rally in the markets.
It is a reminder that even when the market is roaring higher to the tune of 250+ points, stocks still have lives of their own. Some stocks will actually continue to pullback, becoming more attractive and inexpensive at the exact same time that the market, as a whole, is become relatively less attractive and more overbought.
Other stocks that were pulling back will feel the tug of the market's bullishness and find themselves unable to move lower. While such stocks are not necessarily bad trades as their pullbacks are aborted, they are usually not as attractive candidates as they had been the day before when they were lower and less "loved" by traders and active investors.
And, of course, there is that third category of stocks that may or may not have been making the kind of pullbacks that we like to see. But have nonetheless become "unfit for trading" due to a downgrade in their PowerRatings that is often accompanied by strength in the broader market.
As you might imagine, today's report features an example of all three types of stock: the good, that held their high Short Term PowerRatings throughout the trading day, the bad, which had high Short Term PowerRatings but lost them over the course of the trading session, and the ugly, which may or may not have begun the day with a high Short Term PowerRating but, by the end of the day, had actually been downgraded all the way down to our lowest, "consider avoiding" levels.
First up, the good, in the form of W. R. Grace & Company (GRA | Quote | Chart | News | PowerRating). W.R. Grace & Company had a Short Term PowerRating 8 when trading began on Wednesday, and managed to maintain that 8 rating all day into the close. It is especially interesting that the stock kept its 8 PowerRating insofar as the stock went from a very oversold 2-period RSI of 13.50 as of the close on Tuesday to a neutral 2-period RSI of 59.72.
The bad? How about Celestica Inc. (CLS | Quote | Chart | News | PowerRating)? Celestica, like W. R. Grace & Company, began trading on Wednesday with a Short Term PowerRating of 8 and a very oversold 2-period RSI of 5.11. However, strong buying on Wednesday caused the stock to move dramatically higher, going from very oversold to neutral (an RSI of 60.02) in a single session. That is why the stock went from a Short Term PowerRating of 8 to a Short Term PowerRating of 7.
Saving the ugly for last, we have CV Therapeutics (CVTX | Quote | Chart | News | PowerRating). Admitedly, CV Therapeutics did not have the sort of high Short Term PowerRating that we saw in both W. R. Grace & Company and Celestica. Rather, CVTX began trading on Wednesday with a very average Short Term PowerRating of 6. However, over the course of the trading day, shares of CV Therapeutics reversed just as they were testing their 200-day moving average for resistance. After a very strong day on Tuesday, which saw the stock get so oversold as to have a 2-period RSI of 91.92, the pullback in CVTX swiftly took the stock from being very overbought to neutral.
Although not quite an ideal short, the stocks' Short Term PowerRating of 3 marks CV Therapeutics as a stock that traders should certainly avoid if they are looking for stocks that are likely to be higher over the next few days.
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David Penn is Senior Editor at TradingMarkets.com.
