Dow is The Weakest Major Market Index
Stock prices have become overbought on many indicators but PowerRatings is neutral on most stocks and ETFs tracking major market indexes. Most stocks and ETFs have PowerRatings of 4 to 7 indicating they are neutral.
DIAMONDS Trust (NYSE: DIA) is the ETF that is closest to offering a potential buy signal. The current PowerRatings of DIA is 5 but DIA is below its 5-day moving average (MA). Buy signals in PowerRatings require a stock or ETF to be below this MA although there are additional quantifiable rules that must be met before a buy signal is actually given.
PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.
In the past, buying stocks with a rating of 8 on a 5% pullback the next day and selling five days later has been profitable 72% of the time. The average winner has gained 3.9%. Waiting for the PowerRatings to reach 10 has been even more profitable with a win rate of 75% when buying on a 3% pullback the next day and selling five days later. The average winner with that buy setup gained 5.9%.
Other entries and exits also show high winning percentages and large average gains.
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All data is as of the end of day on 2/21/2014.