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The late sell-off on Wednesday was another indication that the opportunities to buy high PowerRatings stocks on pullbacks may be coming closer.
Until the markets actually begin pulling back in earnest, the number of high PowerRatings stocks is not likely to increase dramatically. The roster after the close on Wednesday was similar to the one from the previous close: a 9- or 10-rated stock, but mostly 7s and 8s.
For traders looking to take advantage of pullbacks in the 8-rated stocks, those that have historically tested to outperform the average stock by a margin of more than 6 to 1 after five days, I have suggested waiting for deeper intraday weakness. In other words, rather than taking the trade with a limit order 2 or 3% below the previous day’s close, traders may want to consider waiting for the stock to pull back even more, by 5 or 6%.
While this will often result in fewer overall trades, the trades that are taken will involve buying stocks at exceptionally oversold levels. And our research into short term stock price behavior is consist and clear when it comes to the short term reversals very oversold stocks have historically produced.
Of the three stocks highlighted in my last column, two have closed above their 5-day moving averages in recent days: AngloGold Ashanti (AU | Quote | Chart | News | PowerRating) and Family Dollar Stores (FDO | Quote | Chart | News | PowerRating). Family Dollar Stores, by the way is instructive insofar as the stock rallied more than 4% to close above its 5-day moving average on Tuesday only to reverse lower on Wednesday. Traders who "hung around" instead of taking gains on the close above the 5-day moving average (or on the open of the following day) are likely sitting with more questions than profits – at least as of Wednesday’s close.
The Pantry (PTRY | Quote | Chart | News | PowerRating) continues to pull back and is now cents away from its 200-day moving average. As such, the stock has a PowerRating of 9 and is still worth watching. To The Pantry, here are another four stocks to round out today’s 5 PowerRatings Stocks for the Next 5 Days.
Systemax Inc. (SYX | Quote | Chart | News | PowerRating) PowerRating of 8. Closing lower for ten days in a row, SYX has slipped into a consolidation range with several intraday crosses below its 200-day moving average. The stock’s 2-period RSI is less than 14.
3Par Inc. (PAR | Quote | Chart | News | PowerRating) PowerRating of 8. 3Par Inc. closed down for a third day in a row – sixth out of the past seven – above its 200-day moving average on Wednesday. The continued selling in the stock has brought its 2-period RSI down below 5, the most oversold PAR has been since early March.
Ivanhoe Mines Ltd. (IVN | Quote | Chart | News | PowerRating) PowerRating of 8. Down six out of the past eight trading days, IVN has a 2-period RSI of less than 14. IVN is trading near its lowest closing levels in a month.
Hansen Natural Corporation (HANS | Quote | Chart | News | PowerRating) PowerRating of 8. HANS has closed lower for four consecutive trading days above its 200-day moving average. The stock has a 2-period RSI of less than 4.
Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of more than 14 to 1 after five days. Click here to start your free, 7-day trial to our Short Term PowerRatings!
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