How We Found an Edge after LIZ was Downgraded
Each day,
TradingMarkets publishes
7 Trading Ideas for Today, a selection of stocks from our daily indicators. TradingMarkets
Stock Indicators are based upon our latest quantitative research, and
highlight trading edges backed by our database of more than 7-million historical
simulated trades.
On Wednesday,
March 28,
Liz Claiborne
(
LIZ |
Quote |
Chart |
News |
PowerRating) was
the candidate from the
2-Period RSI Below 2
list. These are stocks that have a 2-period RSI reading
below 2 and are trading above their 200-day moving average. Our research shows
that stocks trading above their 200-day moving average with a 2-period RSI
reading below 2 have shown positive returns, on average, 1-day, 2-days and
1-week later. Historically, these stocks have provided traders with a
significant edge.
The
TradingMarkets mantra is to “buy weakness,” and that is exactly what you could
have done here. A week earlier, on March 23, Goldman Sachs downgraded the stock
from “Buy” to “Neutral,” which helped to accelerate the selling pressure. While everyone in the media was warning of major weakness, our
research shows that these types of oversold conditions create a bullish edge for
stocks.
1-day later, LIZ closed
-0.1%.
2-days later, LIZ closed +0.8%.
5-days later, LIZ closed +4.0%.
Obviously,
results like these do not occur every time, but
our quantified research clearly shows that the edges exist during extreme
oversold or overbought conditions.
Check out our
latest quantified research articles
here. If
you don’t already have a TradingMarkets subscription,
click here
for a free 7-day trial. Check back daily for more 7 Trading Ideas for Today,
and develop your own watchlist of stocks with historically-backed edges.
John Lee
Associate Editor