Set Ups at Work: 5 Stocks Primed for Gains
Set ups at work is not a new on the job dating guide, but rather the short term stock trader’s bread and butter. Locating shares “setting up†for short term moves is how traders make their money. Many so called set ups are based on trader legends and myths containing no real statistical evidence of their effectiveness, only hearsay and anecdotal claims keep these dubious ideas alive.
We made the decision to actually test an assortment of short term stock set ups in a scientific and statistically valid manner. It was quickly learned that most of the traditional so called set ups are worthless providing the trader with no edge what so ever for profits. One would actually be better off randomly guessing then using the majority of the common set ups we tested.
However, in our extensive testing going back to 1995 and covering literally millions of trades, several set ups have proven time and time again to provide the short term trader a significant edge in choosing stocks to trade for the 1 day, 2 day, and 1 week time frame.
This article will review one of these proven set up methods and present 5 stocks meeting this exact criteria right now. It’s called the 5 down days, RSI(2)<1, and Short Term PowerRating > 8 set up. Although it may look complicated at first glance, it’s actually a very simple concept, let me explain step by step.
First you look for stocks trading above their 200-day simple moving average. This assures that a strong upward trend is in place with the company. Next, you drill deeper into this list, finding those names that have fallen back for 5 or more sessions, yet are still above the 200-day simple moving average. The next step is to take this list and further shake it out to find names that the 2 period Relative Strength Index RSI(2) is less than 1. For further information on the tweaked RSI(2), Click Here.
The final step is to further drill into the list, pulling out only those stocks with a Short Term PowerRating of 8 or above to further increase your odds of short term gains in the stock. Although counter intuitive, this set up has solid reasons why it works. These are stocks that are in the most extreme oversold conditions, yet still in a long term uptrend, they are often the first to react strongly and positively as investors go bargain hunting.
Here are 5 stocks setting up now for your watch list:
Papa John’s International
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PZZA |
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PowerRating) Short Term PowerRating 8. RSI(2) 0.38
Chipotle Mexican Grill
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CMG |
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PowerRating) Short Term PowerRating 8. RSI(2) 0.32
First Cash Financial
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FCFS |
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PowerRating) Short Term PowerRating 8. RSI(2) 0.72
Grupo Aeroportuario
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PAC |
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PowerRating) Short Term PowerRating 10. RSI(2) 0.46
Claymore Global Solar
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TAN |
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PowerRating) Short Term PowerRating 8. RSI(2) 0.67
Note that all 5 stocks in today’s report have Short Term Power Ratings above 8. Learn more strategies for trading stocks in the short term with a free trial to our Power Ratings! The highest rated stocks have outperformed the average stock by a margin of more than 14 to 1 over 5 days! Click here to launch your free PowerRatings trial today!
David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.