5 Oversold Stocks for Traders
High Short Term PowerRatings stocks on pullback? These days, you can have them by the bag!
It’s hard to remember the last time we had so many 9-rated stocks in our list of top Short Term PowerRatings stocks. You would think that the broader market had sold off viciously, leaving battered stocks and incredible pullbacks in its wake.
Instead, a bit of sideways movement, a few days when neither the bulls nor the bears were able to gain complete control of the market, has allowed a number of strong stocks to pullback to levels at which they become attractive candidates to the long side once again.
When markets cool down after a significant rally, which we had last week, they provide an opportunity for stocks that were overbought to start to pull back. Often, these pullbacks offer extraordinary opportunities to take positions in stocks or markets that have been in runaway bull markets.
Traders dealing with such stocks or markets need to be constantly wary of chasing prices higher. By waiting for a pullback, traders who follow our approach to swing trading not only maximize the likelihood of buying lower, they minimize the likelihood of ever chasing stocks higher.
This is the kind of basic discipline that can make the difference between being a breakeven trader or a successful–or even great–trader. It is not the only way to trade stocks, of course, but it is an approach that has succeeded in our model-driven historical testing, as well as in the real-life trading of market professionals around the country who buy weakness and sell strength, and who use our Short Term PowerRatings to help screen the truly great from the merely good trading opportunities.
Another tip: not only do we want strong stocks that are pulling back, we also want stocks to move lower after we have targeted them for trades. We call this “intraday weakness” and it is another major part of our strategy to buy low and sell high. By looking to enter a market at anywhere between 2% and 6% below the previous close, we are making an extra effort to find those stocks that have truly weak holders, “weak hands” who are still willing to sell after a stock has already fallen by 10% or more, or pulled back for five consecutive days, or have an exceptionally low 2-period RSI of 10 or less.
These are proverbial babies being thrown out with the bathwater. And, according to our research involving millions and millions of simulated stock trades, these “babies” are more often than not trades well worth taking.
All of the stocks in today’s report have Short Term PowerRatings of 9. Our research indicates that stocks with Short Term PowerRatings of 9 have outperformed the average stock by a margin of more than 13 to 1 in five day’s time.
I have also included the 2-period Relative Strength Index values for each stock, so that traders can see just how oversold the different stocks are relative to one another.
United States Steel
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X |
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PowerRating). Short Term PowerRating 9. RSI(2): 9.02
GMX Resources
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GMXR |
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PowerRating). Short Term PowerRating 9. RSI(2): 6.81
Petroquest Energy
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PQ |
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PowerRating). Short Term PowerRating 9. RSI(2): 5.47
Peabody Energy
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BTU |
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PowerRating). Short Term PowerRating 9. RSI(2): 8.92
BJ Services
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BJS |
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PowerRating). Short Term PowerRating 9. RSI(2): 9.44
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David Penn is Senior Editor at TradingMarkets.com.