A Pair of Top Stocks for Traders: TMX, FFH
A mild pullback on Thursday has left us with a dwindling number of stocks with the sort of high Short Term PowerRatings that we encourage traders to look for.
The result is an “odd couple” of stocks. Two names: one of which we pointed traders toward yesterday and another that is likely an unknown stock to many readers. But both of these stocks are among the few that have not yet rallied as result of the market strength we have seen in recent days.
And the longer they delay, at current levels, the more opportunity traders will have to buy into these stocks at lower, more attractive levels.
As we discussed this morning in our TradingMarkets Battle Plan for Stocks, a daily, pre-market subscription service available to short term traders, these are the kind of markets that can get traders into trouble, as a positive surprise late in the day spills over into additional buying into the following day. The volatility of such occasions can be all the more potent when that following day is options expiration day–as is the case today.
Trouble notwithstanding, traders can keep themselves on track by sticking to a discipline such as the one we talk about every day at TradingMarkets: when the markets are down and becoming more and more oversold, look for strong stocks trading above their 200-day moving averages that are pulling back. These are the stocks that will make some of the best moves to the upside when the broader market’s correction subsides.
And, on the other hand, when the markets are up and becoming more and more overbought, traders should look for weak stocks trading below their 200-day moving averages that are bouncing higher. These are the stocks that will make some of the most significant moves to the downside when the broader market’s rally ends and stocks in general begin to pullback.
Both of the stocks in today’s report have Short Term PowerRatings of 8. Our research, examining short term stock price behavior through millions of trades between 1995 and 2007, indicated that stocks with Short Term PowerRatings of 8 tended to outperform the average stock after five days by a margin of more than 8 to 1. When stocks with this kind of edge are purchased on weakness—