5 Top PowerRatings Stocks for Traders: OPTM, ONNN, WIRE, VIP, TTEK
A pause in the selling early on Wednesday gives traders a chance to survey the terrain for strong stocks that have been made less expensive due to the markets’ recent turn to the downside.
The five stocks in today’s report have Short Term PowerRatings ranging from our highest rating of 10 to 8. Our research into short term stock price behavior from 1995 to 2007 indicates that stocks with Short Term PowerRatings of 8 have outperformed the average stock by a margin of more than 8 to 1 after five days. Those stocks with our highest Short Term PowerRating of 10 have performed even better, besting the average stock by a margin of nearly 17 to 1 over the same time period.
Let’s take a look at the stocks.
Optium Corporation
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PowerRating) Short Term PowerRating 10. RSI(2): 5.92
When stocks develop low Short Term PowerRatings above the 200-day moving average, those instances of being “over-extended” often anticipate significant pullbacks – as has been the case with Optium Corporation in the second half of May.
Notice how the stock’s Short Term PowerRating plunged as OPTM broke out above its 200-day moving average near mid-May and began moving almost vertically higher. This helped create a significantly overbought condition in the stock – which had a 2-period RSI of more than 99 on May 21st. The current pullback is the result of the stock’s reaction to being so overextended to the upside.
On Semiconductor Corporation
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PowerRating) Short Term PowerRating 9. RSI(2): 10.17
For virtually all of April and the first half of May, shares of On Semiconductor featured low Short Term PowerRatings of 3 or less. These low ratings developed as the stock first moved higher to challenge the 200-day moving average, and continued as ONNN broke out above that level.
Since peaking out in the middle of May, ONNN has pulled back and begun moving sideways, which has helped the stock “climb down” from its extreme overbought levels of a few weeks ago.
Encore Wire Corporation
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PowerRating) Short Term PowerRating 8. RSI(2): 20.39
On three occasions in the past few months, shares of Encore Wire Corporation experienced Short Term PowerRatings downgrades to 3. And in all three instances, the stock pulled back almost immediately afterward.
This, again, reveals another way that traders can use the full gamut of our Short Term PowerRatings. While aggressive traders may prefer to sell stocks short whenever their Short Term PowerRatings drop into the 3 or lower “consider avoiding” levels, more cautious or conservative traders can use these signals to help anticipate pullbacks that might help them spot stocks that may become good, oversold trading opportunities.
Vimpel Communications
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PowerRating) Short Term PowerRating 8. RSI(2): 6.67
The PowerRatings chart of Vimpel Communications resembles in many ways the PowerRatings chart of Encore Wire Corporation. Both stocks rallied above their respective 200-day moving averagse in April, pulled back to test their 200-day moving averages later in the month and then went on to make new highs in May.
Since then, like WIRE, shares of VIP have pulled back again, only this time both stocks developed higher, “consider buying” Short Term PowerRatings making them even more compelling candidates for trades than they were during their previous pullback.
Tetra Tech Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 14.43
Tetra Tech Inc. has been in a strong uptrend over the past two months, rallying from the $18-$19 level in early April to the high $20s in late May. While the stock has exhibited low Short Term PowerRatings frequently during its ascent, early June is the first time those low Short Term PowerRatings – and the overbought conditions they reflect – have resulted in the sort of high Short Term PowerRatings that traders looking for strong stocks on sale can rely on.
David Penn is Senior Editor of TradingMarkets.com.