3 Top PowerRatings Pullbacks for Short Term Traders: YHOO, AXP, GS
With commodity stocks helping lead the markets lower in recent days, it appears as if quality pullbacks across the board in stocks may be just around the corner.
This means that PowerRatings traders should be on the lookout for those stocks that are selling off most aggressively, gapping down, closing down for multiple days in a row and, importantly, earnings PowerRatings upgrades.
It can be tempting for PowerRatings traders to jump on the first 8-rated stock they see as soon as the markets begin selling off. But patience as markets turn lower can be rewarded by waiting for these 8-rated stocks to pullback even further, becoming more oversold, and earning a PowerRating upgrade to 9 or even 10. These are the stocks that, according to our research, have outperformed the average stock by margins of more than 9 to 1 after five days.
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High probability trading – in stocks as in ETFs – is all about waiting for the biggest edges and the brightest opportunities. This means sometimes waiting for what may seem like good opportunities to become even better ones. But that is what high win-rate, mean reversion trading is all about.
Shares of Yahoo!
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PowerRating) plunged on Wednesday after news of a deal with Microsoft drew a wave of profit-taking. The stock lost 12% and now has a single-digit, 2-period RSI of less than 7.
Yahoo has a PowerRating of 8.
Mentioned earlier this week, American Express
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PowerRating) remains under significant selling pressure.
With a PowerRating of 9, American Express is among the more potentially attractive stocks for those looking for opportunities to buy blue chip pullbacks. The most oversold stock in the Dow industrials, AXP lost more than 5% over the first few days of the week before recovering somewhat on Wednesday.
Last but not least is another financial stock, Goldman Sachs
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PowerRating), which earned a PowerRating of 8 as of Wednesday’s close.
Goldman Sachs has only begun to sell-off over the past three days, and has yet to see the sort of sizable down-day that characterizes the sort of mass profit-taking and even panic selling that leads to some of the best kinds of mean reversion trading opportunities.
Whether or not GS will provide such an opportunity remains to be seen. But further weakness in Goldman Sachs will likely attract a significant number of traders looking to pick up shares of the apparently indestructible financial firm while the market has put those shares “on sale.†It may be worth noting that Goldman Sachs is more oversold now than it has been since crossing above its 200-day moving average in April of this year.
David Penn is Editor in Chief at TradingMarkets.com.