5 Top Nasdaq Pullbacks for Traders: LECO, PTEN, RACK, MRVL, ACTL
The Nasdaq Composite retraced virtually all of its Wednesday gains on Thursday as the markets continued their sideways churning.
It goes without saying that a day when a market like the Nasdaq is down more than 2 1/2% in a single session, there are likely to be more than a few quality pullbacks left in its wake. And while we do not have the same overwhelming number of high Short Term PowerRatings stocks that we had yesterday, for example, there remain a healthy number of 9- and 10-rated stocks from which traders looking to buy weakness and sell strength.
One point worth underscoring is the idea of focusing on the most oversold of the high Short Term PowerRating stocks. We use the 2-period RSI as our key indicator of whether or not a stock is overbought or oversold — a Relative Strength Index with a “shortened stroke” so as to capture only the short-term price movement that is important for traders operating in the short term trader’s “sweet spot” of 5 to 8 days.
Additionally, we look for more extreme values in the RSI compared to the average technician who uses this indicator. While most technicians consider a market oversold with a RSI reading of 30, we require a 2-period RSI to fall below 5 — at least, and preferably under 2 — before we consider that stock oversold enough to be likely to move higher in the near term.
This opinion is supported by our analysis of millions of simulated short term stock trades between 1995 and 2007. Specifically, we found that stocks with 2-period RSIs of less than 2 have been higher in one-day, two-day and one-week timeframes. When combined with our Short Term PowerRatings, the 2-period RSI helps traders wield a potentially sizable edge when it comes to short term stock trading.
Here are a set of five stocks, three of which have 2-period RSIs of less than 1 — let alone less than 2. A fourth stock has a 2-period RSI that is only fractionally beyond 2, and a fifth stock has a 2-period RSI of under 5. All of them have the sort of Short Term PowerRatings that, according to our research, suggest the likelihood of outperforming the average stock by more than 8 to 1 in the case of 8-rated stocks and more than 13 to 1 for 9-rated stocks.
Lincoln Electric Holdings
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LECO |
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PowerRating) Short Term PowerRating 9. RSI(2): 0.231
Patterson Energy
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PTEN |
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PowerRating) Short Term PowerRating 9. RSI(2): 0.595
Rackable Systems Inc.
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RACK |
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PowerRating) Short Term PowerRating 9. RSI(2): 0.781
Marvell Technology Group Ltd.
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MRVL |
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PowerRating) Short Term PowerRating 8. RSI(2): 2.27
Actel Corporation
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ACTL |
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PowerRating) Short Term PowerRating 8. RSI(2): 4.43
Does your stock trading need a tune-up? Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of nearly 17 to 1 after five days.
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Whether you have a trading strategy of your own that could use a boost or are looking for a way to tell the stocks that will move higher in the short term from the stocks that are more likely to disappoint, our Short Term PowerRatings are based on more than a decade of quantified, backtested simulated stock trades involving millions of stocks between 1995 and 2007. Click the link above or call us at 888-484-8220, extension 1, and start your free trial today.