Beyond the Bailout: 5 Stocks for Swing Traders
Stocks ended a back and forth session lower on Tuesday as criticism of the administration’s $700 billion bailout plan grew in Washington and around the country.
Yesterday we were left with a market that was more or less in neutral mode with a slight bias to the oversold. Tuesday’s decline officially marks the S&P 500, Dow Industrials and Nasdaq Composite as oversold.
From the point of view of the swing trader, now is the time to begin looking at opportunities to buy stocks that are pulling back. However, we are not interested in just any stock. For one, we are looking only for stocks that are trading above their 200-day moving averages. These are the stocks that our research looking back to 1995 indicates are most likely to respond positively to the resumption of buying power compared to those stocks that are trading below their 200-day moving averages.
Second, and most obviously, we are looking for high Short Term PowerRatings stocks that are pulling back but still trading above their 200-day moving averages. These stocks not only have the edge of trading above their 200-day moving averages, but also stocks in this category have shown a historical capacity to outperform the average stock in the short term.
Our highest Short Term PowerRatings stocks — those with Short Term PowerRatings of 10 — have outperformed the average stock by a margin of nearly 17 to 1 after five days. This is a tremendous potential edge for swing traders working in the 5-8 day timeframe. Stocks that received Short Term PowerRatings of 9 were also excellent performers, besting the average stock by more than a 13 to 1 margin over the same five-day timeframe.
Coldwater Creek Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 3.57
Wet Seal Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 15.48
Steve Madden Ltd.
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PowerRating) Short Term PowerRating 8. RSI(2): 4.81
Children’s Place Retail
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PowerRating) Short Term PowerRating 8. RSI(2): 18.34
Group 1 Automotive Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 16.34
Most of the stocks in today’s report have Short Term PowerRatings of 8 — which we consider to be a “high” rating. When combined with clear oversold conditions — such as those revealed by a low, 2-period Relative Strength Index (preferably less than 10) — 8-rated stocks can be among those best suited for short term trades when markets — and the stocks within them — go on sale.
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.