Unemployment Reports, Volatility and Potential PowerRatings Buys
Every month, the unemployment report has the potential to move markets. Some studies have found that the trading range of broad market indexes is three times greater than average on the day after the report. Unemployment has taken on greater significance since the Federal Reserve pegged low interest rates and easy money to the unemployment rate. Many analysts believe the Fed’s policy is now driving the bull market to new highs.
On volatile days, traders may find it useful to have a short watch list of stocks likely to get a bounce if the news pushes markets up. PowerRatings provides a list of oversold technology stocks and a number of them have PowerRatings of 8 or higher.
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.
As an example of the results seen with these signals in the past, buying stocks with a rating of 9 on a 3% pullback the next day and selling five days later has been profitable 75% of the time with an average winner of 4.3%. Other entries and exits also show high winning percentages and large average gains.
Tech stocks tend to be the most volatile performers on any given day. Knowing that increased volatility is likely, tech stocks could be especially appealing to short-term traders. The Top 25 Technology Stocks with high PowerRatings could be considered buys on additional weakness.
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All data is as of the end of day on 4/3/2014.