Eleven 10s to Start the Week

Stocks ended higher on Friday after a better than expected employment report sparked a broad rally. SPDR S&P 500 ETF (NYSE: SPY) ended the day up 1.1% and other ETFs tracking major market indexes showed similar gains. While the gains were widespread with about two-thirds of the individual stocks and ETFs that traded on Friday ended higher, there are a number of buying opportunities heading into Monday’s trading. One stock, Multimedia Games Holding Company (NASDAQ: MGAM), ended Friday with a PowerRatings of 10, the highest possible rating. Eight ETFs and two leveraged ETFs also ended the week with PowerRatings of 10.

Symbol	10/06 Opening PowerRatings	Name
MGAM	10	Multimedia Games Inc.
GDX	10	Market Vectors Gold Miners ETF
FXN	10	First Trust Energy AlphaDex Fund
VDE	10	Vanguard Energy ETF
PID	10	PowerShares International Dividend Achiever Portfolio
ACWX	10	iShares MSCI ACWI ex US
EWC	10	iShares MSCI Canada
RWX	10	SPDR DJ Wilshire International Real Estate ETF
VEU	10	Vanguard FTSE All-World ex-US ETF
DIG	10	ProShares Ultra Oil & Gas
URR	10	Market Vectors Double Long Euro ETN

MGAM has closed lower five days in a row and is now oversold on a number of other indicators as this table from The TradingMarkets Screener shows.

MGAM and the oversold ETFs and leveraged ETFs should be considered potential buys using PowerRatings which are based on the relationship between price and the 5-day moving average (MA) of price. The further prices move away from the 5-day MA, the stronger the tendency to snap back becomes. PowerRatings uses the 5-day MA and several other components to identify high probability trade entry points. This strategy was thoroughly back tested and the history of over 4 million trades was analyzed.

We know from back testing that PowerRatings can be used as the basis of a trading strategy. Detailed back testing has confirmed that the higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.

As an example of a trading strategy that can be used, in the past, buying stocks with a rating of 10, on a 3% pullback the next day and selling after the stock closes above its 5-day simple moving average has been profitable 75% of the time with an average gain of 5.9%. Other entries and exits also show high winning percentages and large average gains.

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All data is as of the end of day on 10/3/2014.