Gearing Up For Santa’s Rally: 3 PowerRatings Stocks
Investors often hear of the Santa Claus stock rally that has become part of the lore of Wall Street. Is there any truth to the impending rally or is it just another stock market legend?
Just like consumers tend to go on gift buying frenzies this time of year, it is said that investors also push up stock prices. Does an epic urge to buy, sweep the markets in the final month of the year? Are there any facts to this conjecture? Â Well, since the start of the Great Depression, December is second only to July when ranked in terms of percentage price gains in the S&P 500. While of course, knowing these cycles is no promise that they will repeat themselves, it’s comforting information for stock bulls to keep in mind.
Savvy short term stock traders really don’t have to worry if the Santa rally materializes this year or not. As a short term trader, all you need is proven tools to help you pick companies most likely to outperform in the 5 day or less time frame. How can traders and short term investors locate these stocks most likely to increase in value, regardless of Santa’s rally happening this year or not?
We have developed an easy to use, fully tested system to help you locate these shares regardless of overall market conditions or questionable veracity of cycles. It is a simple 3 step process for picking stocks most likely for gains over the next week timeframe. This article will explain this simple technique and provide 3 companies fitting each of the steps for your consideration.
The first and most critical step is to only look at stocks trading above their 200-day Simple Moving Average. This assures that a strong, long term up trend is in place, increasing the odds that you are not buying into a falling knife or catching a stock in a death spiral.
The second step is to drill deeper into the list locating stocks that have fallen 5 or more days in a row or experienced 5 plus consecutive lower lows. Yes, you heard me right, fallen 5 or more days in a row. I know this is counter-intuitive of conventional wisdom of buying stocks as they climb higher. However, our studies have clearly proven that stocks are more likely to increase in value after a period of down days than after a period of up days.
The third and final step is a combination of whittling the list down even further by looking for names whose 2-period RSI (RSI(2)) is less than 2 (for additional information on this proven indicator click here) and the Stock PowerRating is 8 or higher.
The Stock PowerRatings are a statistically based tool that is built upon 14 years of studies into the inner nature of stock prices. It ranks stocks on a scale of 1 to 10 with one being the most volatile and least likely for short term gains and 10 proven to be the most probable for gains over the next 5 days. In fact, 10 rated stocks have shown to have a 14.7 to 1 margin of outperforming the average stock in the short term.
The stocks that fulfill each of the above steps have proven in extensive, statistically valid studies to possess solid odds of increasing in value over the 1 day, 2 day and 1 week time frame.
Here are 3 stocks that are poised for short term gains:
Agco Corp
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Dendreon Corp
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Hovnanian Enterprises
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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.