TM’s 10 Rules for Successful Trading
Today’s
PowerRatings article will focus on TradingMarkets Rule 7 – Reduce
Overnight Risk (More); If You Buy Stocks, Buy Better Established Companies
This basically ties
into the same philosophy as Rule 6 which is to try to minimize overnight risk.
Overnight gaps in equities occur all the time. But they tend to occur more in
less established companies, especially those in the technology industry.
Therefore in order to lessen overnight risk, look to trade the better, more
established blue chip companies, especially those found in the S&P 500. For
those of you who are willing to assume a bit more risk, you can expand your
universe to the Nasdaq 100 companies.
Each day we publish a S&P 500 PowerRatings list,
which can be found
here. Here are today’s top PowerRated S&P 500 stocks:
Let’s take a look at charts from S&P 500
companies with PowerRatings above 7:
Corning
(
GLW |
Quote |
Chart |
News |
PowerRating)
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Harrah’s Entertainment
(
HET |
Quote |
Chart |
News |
PowerRating)
Â
NVIDIA Corp.
(
NVDA |
Quote |
Chart |
News |
PowerRating)
KLA-Tencor Corp.
(
KLAC |
Quote |
Chart |
News |
PowerRating)
Circuit City Stores
(
CC |
Quote |
Chart |
News |
PowerRating)
Staples Inc.
(
SPLS |
Quote |
Chart |
News |
PowerRating)
Applied Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating)
From 1995-2005,
stocks with a PowerRating of 8 have outperformed the S&P 500
index on average by an 8.3-to-1 margin, while a PowerRating of 10 doubles that
performance to 16.3.
PowerRatings also help indicate a stock’s
downside as well as timely short-sale entry points; PowerRatings of 1 and 2 have
on average lost money over the next week. A PowerRating of 1 typically
underperformed the S&P 500 by a 5-1 margin. Obviously, you should ideally be
looking to buy high PowerRating stocks and avoid (or short) low PowerRatings
stocks.
You can
attend a free
class on how to use
PowerRatings,
presented by Steve Primo, our Director of Education.
Click here to
try
PowerRatings for yourself, risk free.
Darren Wong
Associate Editor
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Reminder: We are in no way recommending the purchase or short sale of these
stocks. This article is intended for education purposes only. Trading should be based on your own understanding of market conditions,
price patterns and risk; our information is designed to contribute to your
understanding. Controlling risk through the use of protective stops is critical.
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