PowerRatings Review: Selling a Strong Market
Stocks roared higher on Monday, with the S&P 500 gaining more than 3%.
Strength in markets overall helped bring a number of high PowerRatings stocks that we have been watching out of oversold territory and into the profit-taking zone. Of the 5 stocks from my last column, 5 PowerRatings Stocks for the Next 5 Days, fully three were up big on Monday.
Darden Restaurants
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PowerRating) was up more than 6%. Sherwin-Williams
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PowerRating) gained more than 5%. And Staples
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PowerRating) advanced by more than 3%.
In all three instances, the stocks closed above their 5-day moving averages on Monday. Recall that this is our favorite exit signal for high probability short term trades — in both stocks and exchange-traded funds (ETFs). When we buy a stock or ETF on weakness and are looking to sell into strength, a close above the 5-day moving average is a “show of strength” in the short term that we have tested with excellent results.
Read more about how to trade using the 5-day moving average in Larry Connors’ trading primer, How to Find the Best Stocks to Trade Every Day..
Of the remaining two stocks from my last column, both California Pizza Kitchen
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PowerRating) and Cintas Corporation
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PowerRating) were higher on Monday, but only mildly so. Of the two, CPKI is the one that still has the high PowerRating of 8, while Cintas Inc.’s PowerRating has slumped to a 6. Nevertheless, neither stock has shown yet the requisite “show of strength” (i.e., a close above the 5-day moving average) that tells us it is time to exit. This could mean that the stocks still have the opportunity to move higher based on their current most recent weakness.
To California Pizza Kitchen and Cintas Corporation., I’ll add another oversold, high PowerRating stock for traders to keep their eyes on over the next few days: 99 Cents Stores Inc.
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PowerRating). 99 Cents Stores not only has a PowerRating of 9. But also the stock has closed lower for the past four days in a row and has had a 2-period RSI of less than two for the past two days.
Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of nearly 17 to 1 after five days. Click here to start your free, 7-day trial to our Short Term PowerRatings!