4 Top PowerRatings Stocks for Traders
They say that nobody ever made any money in the markets by panicking. And the market’s reaction to the early sell-off on Monday–at least so far–seems to be a testament to this.
When the markets get hit hard, very hard, most stocks get hit hard, as well. What traders need to do is distinguish between those stocks that got hit hard and are not likely to recover any time soon, and those stocks that will take their shot to the jaw and come back for more.
The former stocks are the Bear Stearns
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Traders need a way of keeping on track. It is so easy to get emotional when traders arrive at their trading desks in the early morning hours on a Monday and see that overseas markets were hammered overnight and the futures for the U.S. markets are down by 1%, 2%, 3% or more. Think back to Monday morning and see if you remember anybody seeming more heated, more impatient, more frustrated–seemingly for no good reason. Chances are they were looking at those pre-market futures.
But rather than focusing on the entire universe of stocks as characterized by a few indexes, veteran traders knew that with the market moving aggressively lower, there were some stocks that were too high to be bought before that were likely to “come in.” By “coming in” all I mean is pulling back to lower levels, often near the support of previous price action or key moving averages. The TradingMarkets strategy of buying weakness means that we want to be buying stocks as they “come in” and move lower to support. And, however ugly a major, pre-market sell-off may seem, such sell-offs are often required in order to bring some of the best stocks down within reach.
The 200-day moving average is one fundamental tool that we encourage traders to use to help stay on track as those stocks are “coming in.” As Larry Connors wrote in a widely-circulated article back when the markets had just begun their correction last fall, “5 Mistakes To Avoid in a Market Trading Below its 200-Day Moving Average,” when markets are under pressure, traders are well-advised to avoid stocks that are similarly under pressure.
Click here to read Connor’s article on trading stocks in troubled markets.
And the best way to avoid stocks that are under pressure is simply to avoid buying stocks that are trading below the 200-day moving average. It sounds simple. But when traders are in “the spot,” it can be easy to, for example, choose to buy a beaten-down stock because, as the flawed thinking goes, it can’t go down much more. As recently as yesterday morning, in the case of Bear Stearns, we were reminded that this is not the case.
All the stocks in today’s report are both trading above their 200-day moving averages as well as having the sort of high Short Term
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Chart Industries
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Bright Horizons Family Solutions
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Vimpel Communications
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Trico Marine Services
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Tired of losing money trading breakouts and breakdowns? Our special, Free Report, “5 Secrets to Short Term Stock Trading” will show you some of the key strategies and attitudes that traders throughout history have used to determine the right time to buy and the right time to sell. Click here to get your free copy of “5 Secrets to Short Term Stock Trading” — or call us today at 888-484-8220.
David Penn is Senior Editor at TradingMarkets.com.