3 Top Nasdaq Pullbacks for Traders

Stocks started Wednesday on a positive note in the hours leading up to the FOMC Fed funds rate decision later today.

Along with the rest of the markets, the Nasdaq Composite has been down three days in a row and has a 2-period RSI of less than 10 as of Tuesday's close. We believe that buying oversold markets that are below their 200-day moving average is not a recipe for long term trading success. But the fact that the Nasdaq is oversold serves as a reminder that there are likely many Nasdaq stocks that, while also oversold, may serve as trading opportunities to the upside when those stocks are trading above their 200-day moving averages.

Let's take a look at some of the stocks that fall into this category.

Methanex Corporation (MEOH | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 4.79

U.S. Concrete Inc. (RMIX | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 1.17

Xyratex Ltd. (XRTX | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 5.54

Of the three stocks in today's report, the stand-out is U.S. Concrete Inc. Not only does U.S. Concrete or RMIX share a Short Term PowerRating of 9 with the other two stocks presented here, but also the stock has the lowest 2-period RSI of all three stocks. This makes RMIX the most oversold stock in the bunch and the one most likely - again, based on its extremely low RSI - to respond both positively and swiftly to any buying pressure that might develop.

The fact that U.S. Concrete is extremely oversold is backed up by a quick reference to the stock's price chart. U.S. Concrete has closed lower for five consecutive sessions leading to Wednesday's trading ever since slipping below its 5-day moving average on June 18th. We have found that in addition to having an extremely low 2-period RSI of less than 2, stocks that are trading above their 200-day moving averages AND have been down for five or more consecutive days have been among the most attractive stocks for traders looking to buy weakness.

Recall that our research, based on millions of simulated short term stock trades between 1995 and 2007, indicates that stocks with Short Term PowerRatings of 9 have outperformed the average stock by a margin of more than 13 to 1 after five days.

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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 at TradingMarkets.com.