iRobot Gained 32% This Week; Find Out How to Spot Stocks Ready to Move

The global equity credit crunch has arrived at full force; further explanation and dissection, from our point of view, is unnecessary at this time. Why do we exempt ourselves from the problems of traders and investors all over the world?

Because we have a time-tested, historically backed quantitative strategy to assist us in these difficult times, and to be able to single out the diamond in the rough. Stocks all over the world are falling, and they are falling fast. However, these oversold conditions are providing classic examples of the oversold pullback that leads to a mean-reverting bounce.

As Warren Buffett said, "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." Buffett's quote embodies the TradingMarkets methodology, which is to buy strong stocks that are pulling back, when everyone else is heading for the hills.

Let's take a look at what we consider the best PowerRatings (for Traders) trade that occurred over the last week. iRobot (IRBT | Quote | Chart | News | PowerRating) has gained 31.7% over the last five trading sessions, and had a high PowerRating (for Traders) of 7 before making the big move.

From the daily chart of IRBT below, we can see that the stock slid for several sessions prior to 8/8/2007. This pullback, along with the stock hitting our other proprietary conditions prompted a high PowerRating of 7, suggesting it was likely to outperform the S&P 500 over the next five days. IRBT went on to gain +31.7% over the next five sessions.

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PowerRatings (for Traders) are a proprietary stock rating method which ranks stocks on a scale of 1-10. The higher the rating, the greater the one week historical gain has been for stocks with that rating. This rating system can help traders outperform the market over the next one to five trading days.

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