Fear…That’s the Other Guys Problem: 5 Exclusive Stock Picks
“Fear…that’s the other guy’s problem. Buy low, sell high.” These immortal words uttered by Louis Winthorpe, III in the funniest movie about the markets ever made, Trading Places, actually contain tremendous stock market wisdom.
Every bullish trader wants to follow the advice of buying low and selling high. However, the questions has always been, “how low is too low?” and “how do I distinguish these bargain stocks among the multitude of downright dogs and losers?”
Traders want to make fear work to their benefit by buying when others are selling. Staring fear in the face and taking action is what separates the winners from the losers in the short-term stock trading game. Professional traders and institutions lay in wait for opportunities to buy stocks on the cheap. Bargain hunting is their specialty. When fear is at the greatest point, the pros put their cash to work resulting in a price bounce. How does one locate these stocks that are oversold and due for a short-term bounce? We have developed a simple, proven 3 step system to locate these companies.
The first and most critical step is to only consider 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 dog 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 realize this fly in the face 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 5 stocks that are ready for the bargain hunters to trigger a short-term bounce.
BSD Medical
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BSDM |
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PowerRating): PowerRatings 10
Angiotech Pharmaceuticals
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ANPI |
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PowerRating): PowerRating 10
Liz Claiborne
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LIZ |
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PowerRating): PowerRating 9
Steel Dynamics
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STLD |
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PowerRating): PowerRatings 8
US Steel Corp
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X |
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PowerRating): PowerRating 8
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 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.