How to become a better short seller
One of the great things about
PowerRatings
is that they can be used in so many different ways. Once you
understand the basics, you can combine them with a myriad of trading styles.
Each day I’m going to highlight some of the different ways you can incorporate
PowerRatings
into your existing trading strategies and hopefully teach you a few new ones
along the way. I’ll also show you some of the ways our members are using
PowerRatings
to improve their trading.
In today’s example, let’s take a look at Dynamic
Materials Corp.
(
BOOM |
Quote |
Chart |
News |
PowerRating).
BOOM has been in an upward sloping trend channel
since early December. A popular trading strategy for stocks that behave like
this is to buy them at the lower trend line and sell them when they hit the
upper trend line. This is very often easier said than done and more often than
not, by the time you are confident in the pattern the stock will either breakout
higher or fall right through your trend line.
So what can you do? Well, you can check a stocks’
PowerRating
and see if it gives you any buy or sell signals that will increase the
likelihood of success.
The chart of BOOM provides an excellent example.
You will notice that as the pattern developed, the RSI was not confirming the
price action. In other words, each time the stock hit a new high the RSI failed
to hit a new high. This is called a negative divergence and it’s warning that
the rally is getting weaker. Just two days after hitting a new high, BOOM moved
to a
PowerRatingÂ
of 2.
All of these signs taken together made BOOM a
good candidate for a short sale and if you had taken the signal, your 5-day
percentage gain would have been more than 21%.
Click here
to take a free trial of
PowerRatings.
You can also
attend a free
class on how to use
PowerRatings
presented by Steve Primo, our Director of Education.
New!
Click here to learn how to trade
PowerRatings
in a simple, systematic way.
Ashton Dorkins
Editor-in-Chief