When Analysts Warn of Weakness, It’s Often Time to Buy
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 Monday,
March 19, Applebee’s
(
APPB |
Quote |
Chart |
News |
PowerRating) was
the candidate from the
2-Period RSI Below 2
list.
These are stocks that gap
down by 5% or more and are trading above their 200-day moving average. Our
research shows that stocks trading above their 200-day moving average that gap
down by more than 5% 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. Two weeks ago, the AP Business Wire issued a report
entitled “Restaurant
Analysts Wary of Summer,” warning of coming danger in the restaurant sector.
Then last week, Applebee’s announced the
closure of 24 stores across the country. Despite all the negative
press, Applebee’s continued to move higher to close up on the week.
1-day later, APPB closed +1.5%
2-days later, APPB closed +2.3%
5-days later, APPB closed +3.9%
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
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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