A stock that is below its 200-day moving average and down 10% is one thing. But a stock that is down 10% or more in the past few days and trading above its 200-day moving average is, more often than not, a stock that traders should begin paying attention to.

All five stocks in today's report have been down by 10% or more in the past five days. While this is typically the sort of stock behavior that sends investors and traders into a panic, traders who understand the validity of buying strong stocks when they are on sale (a 10% loss in a few days constitutes a big one) and selling them as they return to normal (or even above normal) value.

This is essentially the style of buying low and selling high, which most traders agree on, but many fail to practice in their own trading. Instead, traders have a tendency to buy high and sell higher by trading price breakouts.

There have been enough successful breakout traders for us not to debate their success. We take breakout traders at their word. But what we rely on is an approach to swing trading that is not only time tested ("buy low and sell high" being the virtual golden rule of both trading and investing for generations), but also is backed up by more than a decade worth of simulated stock trades that we conducted as part of an extensive historical back-testing effort.

That effort found, among other things, that buying strong stocks as they pulled back resulted not only in more winning trades than losing trades, but also this approach to trading also resulted in an astonishingly high win rate of more than 70% for long trades. By "strong stocks" we mean stocks that are above their 200-day moving average as of their most recent close.

It is not a particularly sophisticated measurement of a stock's "strength," but we have found that there is a significant difference between buying stocks on pullbacks above the 200-day moving average, and buying stocks on pullbacks below the 200-day moving average. There is simply no powerful edge in the latter - and an abundance of reasons for the former.

This discovery - one among many - led us to the creation of an indicator that looks to spot stocks that are trading above their 200-day moving averages, yet have also pulled back by 10% or more over the past few days. These were the kind of stocks, according to our research, that traders could and should target as potential trades to the upside as their pullbacks end.

To find out more about our research into stocks that have been down by 10% or more in the past few days, click here.

In addition, all five stocks in today's report have Short Term PowerRatings of 8 or 9. Our research, based on millions of simulated stock trades between 1995 and 2007, indicates that stocks with Short Term PowerRatings of 8 outperformed the average stock by a margin of more than 8 to 1 after five days.

Stocks with Short Term PowerRatings of 9 fared even better, besting the average stock by a margin of more than 13 to 1 over the same time period.

Note also the 2-period Relative Strength Index (RSI) values accompanying each stock. We consider stocks with 2-period RSIs of less than 10 to be oversold, with those stocks that have 2-period RSIs of less than 2 being extremely oversold and often warranting immediate attention by traders.

Beazer Homes USA (BZH | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 5.95

Hawaiian Holdings Inc. (HA | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 3.86

Meritage Home Corporation (MTH | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 9.02

TTM Technologies (TTMI | Quote | Chart | News | PowerRating) Short Term PowerRatings 9. RSI(2): 4.80

World Wrestling Entertainment (WWE | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2) 6.56

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.

David Penn is Senior Editor of TradingMarkets.com.