Swing Trading with PowerRatings: Model Trade of the Week in Questcor Pharmaceuticals

Knowing when to buy and when to sell is good. Knowing how to buy and how to sell is even better.

Three down days in late September were enough to earn shares of ^QCOR^ a PowerRatings upgrade from a “neutral” 7 to a “consider buying” 8. For traders using PowerRatings to find the best stocks to trade every day, this may have been enough to put QCOR on the “stocks to watch” list.

When the stock earned a further PowerRatings upgrade to 9, even the most conservative PowerRatings trader was likely to take notice. Stocks that have earned PowerRatings of 9, when traded using intraday entries and dynamic exits, have produced gains of more than 4% on average, with an accuracy rate of 75%. This makes stocks rated 9 or higher the kind of stocks that short term traders want to keep an eye on.

What does it mean to trade using intraday entries and dynamic exits?

Intraday entry: Buy the stock the day after it earns a PowerRating of 9 or 10 IF the stock trades at least 3% below its previous close.

Dynamic exit: Exit the stock on a close above its 5-day moving average. The simple moving average will do.

Let’s take a look at the recent price action in Questcor, applying the concepts of intraday entries and dynamic exits.

Shares of Questcor earned PowerRatings of 9 on September 23. The intraday entry strategy calls for buying the stock the next day IF it trades at least 3% below the previous day’s close (the 23rd). With a close on the 23rd at 25.15, traders would be looking for a 3% intraday entry the following day at 24.40. 

QCOR chart

The very next day, shares of QCOR remained under the sway of sellers who took the stock as low as 24.14 before the close. This further pullback on an intraday basis is what allows traders to take advantage of the intraday entry strategy, taking a position at as low a point as possible as the stock trades toward extremely oversold levels. Note that on this day, the 26th, QCOR again earned PowerRatings of 9.

Once in the position, the only other question is when to get out. When it comes to dynamic exits, exits that move with the market, a close above the 5-day moving average is a quantified strategy for exiting into strength after taking positions on weakness.

In the case of QCOR, the stock rallied into strength the very next day, closing above its 5-day moving average at 25.71.

Intraday entry at 24.40. Dynamic exit at 25.71. Gain for the two-day trade? More than 5%.

For traders who don’t want to sit in front of their screens all day – or buy and hold stocks forever – PowerRatings provide a quantified, data-driven alternative. And when traded as part of a portfolio of stocks and exchange-traded funds, PowerRatings can help short term traders achieve the kind of diversification that is critical in dealing with the volatile markets of the 21st century.

To learn more about trading with PowerRatings, visit us at the link below.

PowerRatings: Scan Just One Number Tonight … To Help You Find Stocks on the Move Tomorrow

David Penn is Editor in Chief of TradingMarkets.com