4 Top PowerRatings Stocks for Traders
Stocks just beginning their pullbacks and stocks testing their 200-day moving averages for support make up four of the stocks that traders should be watching this week.
If you have followed our Short Term PowerRatings for any length of time, then you know that when strong stocks pull back, the Short Term PowerRatings of those stocks tend to move higher. And it is those high Short Term PowerRatings stocks that, according to our research, have been the stocks that were most likely to outperform the average stock over the next few days.
That outperformance can be significant. Reviewing millions of simulated short term stock trades from 1995 to 2007, we found that the stocks that received our highest rating of ten, outperformed the average stock by nearly 17 to 1 over the next five days.
Alone, this provides a powerful edge for the short term trader, who can limit his or her trading choices to those stocks with, if not Short Term PowerRatings of 10, then at least PowerRatings that are similarly above average.
We generally consider stocks with Short Term PowerRatings of 9 or 10 to be the most attractive candidates for short term traders. But even stocks with Short Term PowerRatintgs of 8, well above average, have according to our research outperformed the average stock by a margin of better than 8 to 1 over that same five day period.
All four stocks in today’s report have Short Term PowerRatings of 8 and, as such, can be expected to outperform the average stock in the near term.
I mentioned pullbacks. These four stocks represent two different types of pullbacks that traders are likely to encounter when looking to buy weakness and sell strength. The first type of pullback is displayed in both Netflix
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Netflix
In both Netflix and Exide Technologies, we see stocks that have been in strong uptrends since late January. Netflix rallied from the low $20s to the high $30s, while Exide Technologies managed to more than double from just north of $6 to just north of $13.
Exide Technologies
Traders tend to see stocks like these, stocks that have exhibited strength, and wonder whether or not they should be chased higher. Our approach is never to rush, but instead to wait for strong stocks like these to experience their inevitable sell-off or profit-taking, and then to use that opportunity to pick up shares on sale.
Both these stocks have just begun to pull back. And neither stock is yet displaying the sort of extreme oversold conditions that make for optimal, “buyable” weakness. But with their Short Term PowerRatings of 8, both NFLX and XIDE are stocks that short-term traders should keep an eye on.
The other type of pullback happens when a stock has been trading below its 200-day moving average, breaks out above that level, and then pulls back to test that former resistance level for support.
Viad Corporation
The idea of resistance becoming support is one of the oldest tenets of technical analysis. And it is a tenet that we tend to accept–at least before proven otherwise. The other two stocks in today’s report, Viad Corporation
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UDR
Because of their recent rally above the 200-day moving average, both Viad and UDR are much more oversold than NFLX and XIDE. While this means that opportunity may be more immediate in the cases of VVI and UDR, it also means that these two stock may have already moved low enough to make the further weakness we would like to see somewhat difficult to come by.
Does your stock trading need a tune-up? Read our special, Free Report, “5 Secrets to Short Term Stock Trading Success” for a refresher course on not just why to buy low and sell high, but specifically how you can use intraday weakness in the market to do so. Click here to get your copy of “5 Secrets to Short Term Stock Trading Success” or call us today at 888-484-8220.
David Penn is Senior Editor at TradingMarkets.com.