5 Top PowerRatings Pullbacks for Traders
With the markets largely flat on Wednesday, the lack of buying pressure has helped a number of stocks move lower, becoming more oversold and more attractive to traders looking for strong stocks on sale.
While I have spent a lot of time encouraging traders not to panic when the markets sell off sharply, I should also mention that relatively mild markets can produce excellent trading opportunities, as well.
All we are looking for in pull backs is for stocks that stocks become oversold enough to create a reaction in the other direction. For a stock that is moving lower from, for example, profit-taking, we wait for that stock to move low enough for it to become a bargain to investors and traders who want in, but who are smart enough not to “pay up” for the merchandise.
How do stocks become so oversold or, more to the point, how do we as traders know when stocks are doing the sort of things that tell us they are oversold?
We have a number of metrics we use. Stocks that are down by 10% or more in five days are oversold. Stocks that have experienced five or more consecutive down days or lower lows tend to be oversold. Stocks with 2-period Relative Strength Index values of less than 10 tend to be oversold — those with 2-period RSIs of less than 2 are DEFINITELY oversold.
What is worth keeping in mind, however, is that this sort of price action can take place not only in sharply lower markets, but also in markets that are moving largely sideways. These quiet markets can ironically mask a great deal of opportunity, especially as stocks begin to “drift” on their own accord, no longer overwhelmed by the bias of a strongly rising or falling broader market. And often it is in those over-reactions to individual stocks — stocks that are sold too aggressively, for example — where the opportunity for a positive surprise lives.
Of course, another way to spot these stocks is through our Short Term PowerRatings. Our method of analyzing stocks includes crediting stocks for pulling back as they become more oversold, helping us target potential bargains based on a number of factors, from momentum and trend to volume and volatility. Rather than look at a whole suite of indicators for each of these factors — as well as some of the others mentioned above — our Short Term PowerRatings distill all that data into a single figure. And the higher that figure is, the closer it is to 10, the better the potential opportunity in the stock.
Of the 5 stocks in today’s report, all have Short Term PowerRatings of 9. Our research into short term stock price behavior indicates that stocks with Short Term PowerRatings of 9 have outperformed the average stock by a margin of more than 13 to 1 after five days. These stocks, as well as stocks with our highest Short Term PowerRating of 10, are the stocks that we encourage short term traders to focus on when looking for stocks likely to beat the average stock in the near term.
Venoco Company
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PowerRating) Short Term PowerRating 9. RSI(2): 19.56
Systemax Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 16.55
STEC Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 13.75
Integrated Device Technology
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PowerRating) Short Term PowerRating 9. RSI(2): 4.22
Hercules Offshore Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 6.45
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.