On the PowerRatings web site you can find a list of the most requested stocks. Traders are usually looking at PowerRatings to determine if a particular stock is oversold or overbought in the short term. The most requested stocks are the ones that short-term traders find the most interesting for some reason. While we don’t know the specific reason, we know traders are reviewing whether the stocks should be bought or sold. Stocks with high PowerRatings on the list of most requested stocks could provide short-term trading opportunities. Since we know that traders are interested in these stocks, there could be buying pressure if the stock breaks out. The list of Monday’s most requested stocks is shown below.
Highly rated stocks on the most requested list should be considered potential buys on additional weakness.
PowerRatings are based on the relationship between price and the 5-day moving average (MA) of price. The further prices move away from the 5-day MA, the stronger the tendency to snap back becomes. PowerRatings uses the 5-day MA and several other components to identify high probability trade entry points. This strategy was thoroughly back tested and the history of over 4 million trades was analyzed.
We know from back testing that PowerRatings can be used as the basis of a trading strategy. Detailed back testing has confirmed that 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.
As an example of a trading strategy that can be used, in the past, buying stocks with a rating of 9, on a 3% pullback the next day and selling after the stock closes above its 5-day simple moving average has been profitable 75% of the time with an average gain of 4.3%. Other entries and exits also show high winning percentages and large average gains.
All data is as of the end of day on 9/8/2014.