The Unstoppable Bull & 3 PowerRatings Stocks
Dow 11,000? Just a short 12 months ago, this claim would have brought snickers of laughter across much of the investor/trader community.
Today, the 11,000 barrier could be less than a day away. Even negative news such as the revised GDP coming in slightly worse than expected only triggered a mere blip of selling. For the first time in awhile, the situation outside of the United States appears to be the only factor negative enough to stop the advance.
It is truly amazing what business positive, controlled governmental intervention can provide for the market. One recent example is the announcement of the Fed’s pull out of Citibank. Instead of just doing it, thus triggering dislocation and panic in the shares, the Fed actually gave the move forethought.
They decided to pre-announce exactly how they plan on extracting themselves in an orderly, pre-planned fashion. Rather than selling off on the news, shares have actually gained since the announcement.
It actually appears that the Fed is catching onto the real world reality of the marketplace. I am truly pleasantly surprised at this positive change in the dynamic. The ever moving higher bull does create some dilemma for short term stock traders. Primarily, how you locate stocks most likely to gain in the short term with every company looking strong? We have developed an easy to use, highly effective 3 step system to solve this issue.
The first and most critical step is to only look at stocks trading above their 200-day Simple Moving Average. This assures that a strong, long term up trend is in place, increasing the odds that you are not buying into a falling knife or catching a stock in a death spiral.
The second step is to drill deeper into the list locating stocks that have fallen 5 or more days in a row or experienced 5 plus consecutive lower lows. Yes, you heard me right, fallen 5 or more days in a row. I know this is counter-intuitive of conventional wisdom of buying stocks as they climb higher. However, our studies have clearly proven that stocks are more likely to increase in value after a period of down days than after a period of up days.
The third and final step is a combination of whittling the list down even further by looking for names whose 2-period RSI (RSI(2)) is less than 2 (for additional information on this proven indicator click here) and the Stock PowerRating is 8 or higher.
The Stock PowerRatings are a statistically based tool that is built upon 14 years of studies into the inner nature of stock prices. It ranks stocks on a scale of 1 to 10 with one being the most volatile and least likely for short term gains and 10 proven to be the most probable for gains over the next 5 days. In fact, 10 rated stocks have shown to have a 14.7 to 1 margin of outperforming the average stock in the short term.
The stocks that fulfill each of the above steps have proven in extensive, statistically valid studies to possess solid odds of increasing in value over the 1 day, 2 day and 1 week time frame
Here are 3 highly ranked PowerRatings stocks that fulfill each and every one of the above steps:
^SII^
^PAY^
^DEL^
Learn more strategies for trading stocks in the short term with a free trial to our PowerRatings! The highest rated stocks have outperformed the average stock by a margin of more than 14.7 to 1 after five days! Click here to launch your free PowerRatings trial today!
David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.