Baidu.com Illustrates Key PowerRatings Concepts
Today, we’re going to go deeper into the PowerRatings (for Traders) research,
to highlight the underlying philosophies of our most popular indicator, and
hopefully give you something more to work with in your daily trading.
An important feature of PowerRatings (for Traders) is the ability to see what
a stock’s PowerRating has been over the past 5 days. How can you use this? Let’s
find out.
Below is today’s PowerRatings (for Traders) Top 10 Most Requested
Stocks. Basically, these are the stocks that the most people looked for
yesterday within the PowerRatings database.
Now let’s compare a few charts with their PowerRating (for Traders) over the
past week.
First, let’s check out the biggest change, Baidu.com
(
BIDU |
Quote |
Chart |
News |
PowerRating).
Yesterday, BIDU fell around 10% after a profit warning from analysts at JP
Morgan. Obviously, PowerRatings couldn’t have known this insider information.
However, we can see in BIDU’s PowerRating history that PowerRatings foresaw a
selloff in BIDU’s immediate future. The PowerRating went from 3 to 2 to 1, in
just five days, as the stock kept moving higher and higher. PowerRatings (for
Traders) is geared towards finding short-term extended conditions, and as BIDU
kept climbing, so did its historical tendency to fall from those levels.
A PowerRating of 1 is the worst PowerRating achievable, and signifies a
distinct quantified edge to the downside. PowerRatings accurately judged BIDU’s
propensity to fall, up to 5 days before prices actually dropped.
The main goal of this lesson was to teach you the relationship between
PowerRatings (for Traders) and short-term price movement. As the stock moved
higher and higher into overbought territory, BIDU’s PowerRating became weaker
and weaker, because of the historical tendency of stocks to revert to mean
conditions. As soon as the stock sold off, somewhat reestablishing those
“normal” conditions, BIDU’s PowerRating (for Traders) followed suit, and was
ranked neutrally as a 4.