A rally in the markets may lift all boats. But there are always a few stocks initially left behind as the rest rush forward. And the longer they lag back – or even better, slide lower – the more attractive these stocks become to traders looking to buy low and sell high.
Typically, when markets are moving higher, there are opportunities to sell short weak stocks that have been riding the coattails of the broader market. By selling short these weak stocks after they have moved higher, traders can take advantage of temporarily overbought condition and profit – sometimes greatly, as weak stocks resume their weakness.
However, just because the broader markets are moving higher does not mean that all stocks are participating – or are participating equally. These are the stocks that are still pulling back, that are still under the control of sellers looking to reduce their positions – or to abandon those positions altogether. These are the stocks that swing traders must be on the look out for. Often, these are the stocks where the greatest opportunity for upside often lies.
This is especially true when markets start out the day strong and fade going into the close. That waning of bullish sentiment late in the day often weighs heaviest on those stocks that are already experiencing profit-taking - or worse. Sometimes, it is this late-in-the-day change of sentiment that can tip traders off to the possibility - if not the likelihood - that softer prices are around the corner, and opportunities to buy strong stocks - stocks with high, Short Term PowerRatings trading above the 200-day moving average - on sale.
All five stocks in today’s report have Short Term PowerRatings of 8 or 9. Our research, looking at millions of simulated, short term stock trades between 1995 and 2007, indicates that these stocks have tended to outperform the average stock after five days. We found that stocks with Short Term PowerRatings of 8 have bested the average stock by more than 8 to 1 after five days.
Stocks with Short Term PowerRatings of 9 have fared even better, outperforming the average stock by a margin of more than 13 to 1 over the same, short-term time frame.
I have also noted the 2-period Relative Strength Index values for each stock so that traders can see how oversold they are. Stocks with 2-period RSIs of less than 10 are considered to be oversold, with stocks that have 2-period RSIs of less than 2 being considered especially oversold and usually warranting immediate attention from traders looking to buy weakness.
Itron Inc. (ITRI | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 3.48
Cryptologic Limited (CRYP | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 9.21
SkillSoft LLC ADS (SKIL | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 1.80
Rambus Inc. (RMBS | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 3.21
IPG Photonics Corporation (IPGP | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 36.04
Does your stock trading need a tune-up? Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of nearly 17 to 1 after five days.
Whether you have a trading strategy of your own that could use a boost or are looking for a way to tell the stocks that will move higher in the short term from the stocks that are more likely to disappoint, our Short Term PowerRatings are based on more than a decade of quantified, backtested simulated stock trades involving millions of stocks between 1995 and 2007. Click the link above or call us at 888-484-8220, extension 1, and start your free trial today.
