5 Pullbacks for Traders: TWN, TG, TECUA, SVR, MFB
More sideways action in the markets is helping provide more stocks with opportunities to pullback–which only means more opportunities for traders who like to buy low and sell high.
It may sound like a cliché to say that we trade by buying stocks when they are low and sell them when they are high. But it is common wisdom that is not necessarily so common when it comes to much of the trading that stock traders do nowadays.
I have met and read about far more stock trading strategies that call for traders to buy high and sell higher–or to sell low and sell lower–than I have any other approach to trading. There are variations of course–from those traders who require a clear and pronounced breakout from a consolidation to those swing traders who wait for pullbacks, but still need to see stocks show strength before they buy (or weakness before they sell short).
There are legitimate ways of trading to be sure. But what we like about our approach to short term stock trading is two-fold. For one, buying low and selling high represents an ages-old approach to trading everything from financial assets to commodity futures and most things in between.
For two, our quantified, model-driven testing–which looks back on millions and millions of short term stock trades between 1995 and 2007–tells us that there is a powerful edge in buying strong stocks when they pullback. And that is an edge we believe can be made to work for average, retail traders.
Our Short Term PowerRatings help traders identify the sorts of stocks that can be picked up on pullback. We rate stocks on a scale of 1 to 10, with stocks at the low end of the scale being the stocks to avoid (or sell short) and the stocks at the higher end of the scale being the stocks that traders should consider buying.
We found that the highest Short Term PowerRatings stocks, the stocks with the Short Term PowerRatings of 8 or higher, have actually outperformed the average stock by a margin to 8 to 1 after five days. By buying these Short Term PowerRatings stocks when they are pulling back–and then looking to buy them when they show additional intraday weakness–short term traders have the ability to buy stocks often when they are at or near the lows of their pull back or correction.
The only significant caveat we add to our Short Term PowerRatings is that traders should make sure that the stocks with high Short Term PowerRatings that they select are themselves trading above their 200-day moving averages. It is an additional filter to make sure that these stocks are on strong shape and trading above their 200-day moving averages. But we believe it is an important filter–and all the more so when the broader markets are under pressure and trading below their 200-day moving averages.
All the stocks in today’s report have Short Term PowerRatings of 8. In addition to listing the Short Term PowerRatings of each stock, I have also included the 2-period Relative Strength Index so that traders can see just how oversold these stocks are.
The Taiwan Fund
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TWN |
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PowerRating). RSI(2): 9.50
Tredegar
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TG |
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PowerRating). RSI(2): 2.44
Tecumseh Products
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TECUA |
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PowerRating). RSI(2): 8.80
Syniverse
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SVR |
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PowerRating). RSI(2): 38.99
Maidenform Brands
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MFB |
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PowerRating). RSI92): 54.99
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.