After 5 Lower Lows, is it Time to Buy?
Each day,
TradingMarkets publishes
7 Trading Ideas for Today, a selection of stocks from our daily indicators. TradingMarkets
Stock Indicators are based upon our latest quantitative research, and
highlight trading edges backed by our database of more than 7-million historical
simulated trades.
On Tuesday,
March 20, Career Education
(
CECO |
Quote |
Chart |
News |
PowerRating) was
the candidate from the
5+ Consecutive Lower Lows
list.
These are stocks that have made a lower low for five
or more consecutive days and are trading above their 200-day moving average. Our
research shows that stocks trading above their 200-day moving average that make
lower lows for five or more days have shown positive returns, on average, 1-day,
2-days and 1-week later. Historically, these stocks have provided traders with a
significant edge.
The
TradingMarkets mantra is to "buy weakness," and that is exactly what you could
have done here. After making 5 consecutive lower lows, this stock becomes a
prime TradingMarkets oversold candidate. CECO is another example of a
trade that took less than 5 days for the edge to unfold; the stock moved as much
as 10% before giving up some gains on overbought conditions.
1-day later, CECO closed +1.0%
2-days later, CECO closed +4.7%
5-days later, CECO closed +7.1%
Obviously,
results like these do not occur every time, but
our quantified research clearly shows that the edges exist during extreme
oversold or overbought conditions.
Check out our
latest quantified research articles
here. If
you don’t already have a TradingMarkets subscription,
click here
for a free 7-day trial. Check back daily for more 7 Trading Ideas for Today,
and develop your own watchlist of stocks with historically-backed edges.
John Lee
Associate Editor