5 Nasdaq Pullbacks for Traders: TRMB, CPST, VLNC, SYMC, SVNT

If a market that plunges by nearly 400 points, then you can bet that finding quality pullbacks will not be the most difficult task in the world to complete.

We are not so macabre as to start dancing on our desks when markets sell off by such a massive amount. But as long as we – or anybody else trading the markets – are not overleveraged or undercapitalized a sell-off – even a 400 point sell-off is just the occasional cost of doing business, a fender bender, an annoying cold on your day off.

And the fact that sell-offs in markets are almost required to help bring down some of the loftier or most sought after stocks is another reality of why traders, to steal a phrase, should learn to stop worrying and learn to love the deep pullback.

For traders who buy weakness and sell strength, as long as the worst stocks are avoided – the stocks that have closed below their 200-day moving averages – the bigger the pullback the better. As one of our traders described it, the farther the market pulls back, the more it is likely to bounce and spring upward when buyers rush back in to take advantage of the discounted prices on "merchandise" that only a few days ago was likely far more expensive.

Admittedly, this type of trading takes a little nerve – or faith – in the beginning. Even though we have quantified this approach to trading – buying pullbacks in strong stocks and selling bounces in weak stocks – through millions of millions of simulated stock trades since 1995, we know that most traders have been so convinced that breakouts and breakdowns are the only way to trade that the notion of pullbacks being bullish events can be difficult to accept at first.

But when the rules are followed – and they are rules no more complicated than those relied upon by breakout and breakdown traders – traders find out that this is indeed the case with pullbacks, that buying them in stocks that are otherwise strong is one of the surest and most efficient ways to swing trade markets – whether those markets are stocks, ETFs, or e-mini index futures.

Here are five stocks that fit this definition of “strong stocks on pullback.” All five are trading above their 200-day moving averages – marking them as strong stocks. And between their high Short Term PowerRatings and low 2-period RSI values, we can tell that these are stocks that have come off their highs and are now at relatively discounted levels that traders may find attractive.

Of the five, perhaps the most interesting is Valence Technology which, while having a good-but-not-great Short Term PowerRating of 8, has an exceptionally low 2-period RSI of less than 3.

Trimble Navigation Limited (TRMB | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 7.34

Capstone Turbine Corporation (CPST | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 5.89

Valence Technology Inc. (VLNC | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 2.11

Symantec Corporation (SYMC | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 10.07

Savient Pharmaceuticals (SVNT | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 9.69

Of the stocks in today’s report two have Short Term PowerRatings of 9 and three have Short Term PowerRatings of 8. Our research into short term stock price behavior indicates that stocks with Short Term PowerRatings of 8 have outperformed the average stock by a margin of 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 time frame.

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.