Trading Monster Markets & 3 PowerRatings Stocks Not To Be Missed
Overbought to an extreme is one way to describe the current stock market conditions. Taking a line from pop star Meat Loaf’s famous song, one could say that the market is acting like a bat out of hell. Regardless of how you decide to describe the current conditions, we are in a massive bull market with limited signs of abatement anytime soon.
The practically unlimited governmental liquidity injections and steady low rates have created an upside monster of potentially unprecedented proportions. It’s a tough call to say how long the party will last. The world’s largest and most powerful economy being supported by the planet’s wealthiest government is uncharted territory. The Non Farm Payroll figures coming in at a shockingly negative 85k was mitigated by the November figures being revised upwards.
Sure, the index futures sold off hard on the release, but the bulls sprung into action quickly and lifting them off the lows. The roaring bull market is certainly amazing for long term stock investors. This is particularly true after 2008s stock debacle. However, short term investors often find issues in locating shares that are primed for short term bullish moves.
In the sea of overbought stocks, the key is to locate those shares that are oversold for short term appreciation. When the market is going up almost every day, how can a short term trader anticipate what stocks are going to climb prior to the fact?
We have developed an easy to use, fully tested system to help you locate these shares regardless of overall market conditions or the whims of daily news. It is a simple 3 step process for picking stocks most likely for gains over the next week timeframe. This article will explain this simple technique and provide 3 companies fitting each of the steps for your consideration.
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 3 (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.
^VLTR^
^TRGT^
^FIZZ^
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.