Did You Catch This 18% Move in RIO?
In today’s PowerRatings Advanced Strategy article, we are going
to review an article written by CEO Larry Connors and Editor in Chief Ashton
Dorkins. Earlier this year, TradingMarkets released additional PowerRatings (for
Traders)
research which gives traders a much larger edge than just using PowerRatings as
a stand-alone indicator.
By adding 2 rules to the PowerRatings indicator, everyday traders can
effectively double the statistical, quantified edge which
PowerRatings already provides.
Click here for percentage details and a further explanation of the research.
Let’s examine the rules, and then a quick example. The 2 rules are as simple
as can be, and clearly define entry and exit rules, so you don’t have to make a
decision; just pull the trigger.
Here are the rules:
1. Only buy a high PowerRating stock (7
or higher) on a limit order below yesterday’s close.
2. Instead of using a static exit and
waiting for five days, use a dynamic price exit by exiting the trade when the
stock closes above its 5-day simple moving average (SMA).
On Monday, August 20, Companhia Vale do Rio Doce
(
RIO |
Quote |
Chart |
News |
PowerRating) had a
PowerRating of 7. At this time, RIO had been steadily falling since late July.
Like other TradingMarkets methodologies, PowerRatings tries to find stocks
that are trading above their 200-day moving average that have fallen
dramatically. Our research, composed of millions of trades in a historical
database, proves that oversold conditions in strong stocks have historically
led to short-term gains.
So now we have a stock, RIO, that has met the 1st condition for this
rule, with a PowerRating (for Traders) of 7. For our purposes, we will use a
limit order about 1-point below the stock’s previous close (about -2.5%), and
buy on even further weakness. The stock falls a point, and then proceeds to
rally, nearly eliminating the previous month’s losses in just 5 days.
We’re sure that once you start using PowerRatings
you’ll be as excited by them as we are, whether you use them as a stand alone
product, along with one of our TradingMarkets systems
or combine them with your own strategies to make them even more powerful.
Start your 7-day Free Trial and see how PowerRatings (for
Traders) can improve your trading.
You can also
attend a free
class on how to use
PowerRatings
presented by Steve Primo, our Director of Education.