A PowerRatings Trading Strategy for the Dips in Education Stocks

  • March 8, 2009
  • David Penn

Stocks ended a volatile Friday session little changed, with a modest bias toward the oversold.  The ETFs for the Dow industrials, S&P 500 and Nasdaq 100 — the DIA
(
DIA |
Quote |
Chart |
News |
PowerRating), SPY
(
SPY |
Quote |
Chart |
News |
PowerRating), and QQQQ
(
QQQQ |
Quote |
Chart |
News |
PowerRating) respectively — all have Short Term PowerRatings of 6.  And the 2-period RSIs of all three are low, but not extremely so.

Looking at individual stocks, there are three stocks with high Short Term PowerRatings that are worth keeping an eye on over the next few days, particularly if they pull back on an intraday basis.  These stocks are:

ITT Educational Services
(
ESI |
Quote |
Chart |
News |
PowerRating)  Short Term PowerRating 9.. RSI(2): 9.72

Corinthian Colleges Inc.
(
COCO |
Quote |
Chart |
News |
PowerRating)  Short Term PowerRating 9.  RSI(2): 10.28

Career Education Corporation
(
CECO |
Quote |
Chart |
News |
PowerRating)  Short Term PowerRating 9.  RSI(2): 1.33 

Note that all three stocks have Short Term PowerRatings of 9.  Our research into short term stock price behavior since 1995 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. 

Traders considering making any of these stocks part of a short term trading strategy should also note that all three stocks come from a similar industry group of educational services.

The 2-period RSI of CECO at 1.33 is especially notable.  We found that stocks with 2-period RSIs of less than 2 tended to have positive historical returns in one-day, two-day and one-week timeframes.  When deciding between high Short Term PowerRatings stocks, those stocks with the lowest 2-period RSIs tend to have the edge in the short term over those stocks that have relatively higher 2-period RSIs.

With regard to recent stocks, note the strength in Emergent Biosolutions
(
EBS |
Quote |
Chart |
News |
PowerRating), which was part of our 5 PowerRatings Stocks for the Next 5 Days late last week.  EBS was up more than 13% on Friday.  Also higher from the most recent 5 PowerRatings Stocks column was Central Garden & Pet Company
(
CENT |
Quote |
Chart |
News |
PowerRating), which was up more than 4%.

Learn How to Trade ETFs! Click here to find out more information about our upcoming High Probability ETF Trading seminar next Friday led by TradingMarkets founder and CEO, Larry Connors!