Read Larry Connors' blog – Short Term Trading Strategies
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Of the stocks we have been highlighting recently, most have rallied above their 5-day moving averages as of the end of last week. Both KLA-Tencor (KLAC | Quote | Chart | News | PowerRating) and JDS Uniphase (JDSU | Quote | Chart | News | PowerRating) advanced on Thursday and Friday, and even with its Friday pull back shares of Best Buy (BBY | Quote | Chart | News | PowerRating) continue to trade above their 5-day moving average.
Recent strength means that our attitude toward the markets right now is one of patience. Among the many virtues of high probability short term trading with PowerRatings is the fact that traders do not have to be "busy", taking sub-optimal trading opportunities when edges are few and far between. Our strategy, by contrast, is to wait for those instances when opportunities are abundant and edges at their sharpest.
Overbought conditions will need to subside before we see the sort of abundance in high PowerRatings stocks that we saw a week ago. So, for now, the task of the PowerRatings trader is to be patient and wait for buyers to become profit-takers once again. In the meanwhile, here are a few high PowerRatings stocks that may be worth watching, especially if they continue to display weakness above the 200-day moving average.
Union Drilling (UDRL | Quote | Chart | News | PowerRating) is indicative of much of the weakness in energy-related shares in recent days. The stock has been in a downtrend since the beginning of June and has recently broken down from a short-term sideways consolidation. The stock has a PowerRating of 9 and has closed lower for the past three days in a row.
Another potential opportunity in the energy patch is Interoil Corporation (IOC | Quote | Chart | News | PowerRating). The stock has been trading sideways for much of the past week, and has become increasingly oversold over the last few days. IOC has a Short Term PowerRating of 8 and may earn a PowerRatings upgrade should shares follow a path similar to that of UDRL in the short term.
High end women’s retailer Talbots (TLB | Quote | Chart | News | PowerRating) climbed by a little over 1% on Friday, but remains under pressure and continues to have a high PowerRating of 8. Down three out of four days before Friday’s bounce, TLB is a stock that may be attractive in the short term on the resumption of weakness above the 200-day moving average.
How can short term traders take maximum advantage of pullbacks in our high PowerRatings stocks? Here are two tips - one for entries and one for exits - that can help you get the most out of our popular, high probability, short term stock rating system.
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