Selling the Buying: 2 PowerRatings Stocks Ready to Reverse
Investors often forget that there is plenty of money to be made on the short side despite the raging bull market. Individual stocks are often overextended, particularly in times like these, and primed for a short-term pullback. The question has always been how to locate these companies ready to give back profits prior to the fact. You can’t relay on news or internet banter as by then it’s normally too late to capture the pullback. Fortunately, we have found a solution to locating these shares.
Our studies, since 1995 have clearly shown that stocks that have gained 10% or more but are still below their 200-day Simple Moving Average are much more likely to drop than those that have recently fallen. Remember, what you see on the chart is the past; it’s too late to profit from any moves that you can observe as they already occurred. Therefore, one needs to anticipate what’s going to happen by using what has happened time and time again in the past as a guide when choosing stocks.
The 10% rise sell rule works since the smart money is looking to realize profits despite the raging bull market. No one wants to wait too long to take profits and selling stocks up by 10% plus yet still in a long term downtrend, as shown by the 200-day Simple Moving Average, seems to be the trigger to dump.
After locating the stocks that fit the 10% up rule, we then drill deeper only looking at shares that have an RSI(2) greater than 97 (for additional information on this proven indicator click here). The next step in making sure the odds are solidly on your side for a short-term drop is eliminate all stocks from this list excepting those with a PowerRatings of 3 or below. The stocks you are left with have proven time and time again to be setting up for the dump over the 1 day, 2 day and 1 week timeframes.
Here are 2 stocks fitting all the above criteria for your short-term consideration:
Transcept Pharmaceuticals
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Himax Technologies
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Learn more strategies for trading stocks in the short term with a free trial to our PowerRatings! The highest rated stocks have outperformed the average stock by a margin of more than 14.7 to 1 after five 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.