Buying Strength A Mistake? 3 Stocks For Short Term Traders
You have been watching a particular stock climb higher and higher every day. Gathering the nerve and going over and over in your head how much money you would have made had you purchased shares last week, you decide to take the plunge purchasing the stock. It’s Almost like the market is out to do you in, since price falls soon after you commit to the trade.
All traders can relate to this scenario. Of course, the market itself is neutral and isn’t out to get you, so what went wrong? You did everything you could by finding a strong stock in a nice uptrend, getting the uptrend to confirm itself prior to buying. Why do shares, so often, drop right after you buy them? Well, our extensive studies since 1995 have proven that there is no positive edge in buying stocks after an advance.
In fact, the edge lies in buying companies that have recently suffered a pull back. Of course, there are certain simple criteria that must be met for the pull back to provide a positive expectancy edge. This article will reveal what our exhaustive studies have determined and provide 3 stocks that are very likely to gain in value over the next 1, 2 days and 1 week from now.
The first step is to make sure the stock isn’t bound for disaster. It’s critical to verify that the pull back isn’t a long crushing death spiral. We place the odds favorably that this isn’t the case by only buying shares that are trading above their 200-day simple moving average. The second step is to find stocks that have pulled back for 5 days or more, made 5 or more lower lows, or have gapped down 5 or 10% or more. Thirdly, we drill deeper into the list, pulling out names whose 2 period relative strength index RSI(2) is less than 2. You can click on this link for details on our tweaked RSI indicator. Finally, we only look at stocks that have a top reading on the Short Term PowerRatings chart. This means the stock has to have an 8, 9 or 10 rating to be considered. Our studies have proven that stocks that meet these criteria will place the odds solidly in your favor for gains over the 1, 2 day and 1 week time frames.
Here are 3 stocks that fit the above criteria:
Global Cash Access
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GCA |
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PowerRating): Short Term PowerRating 10. Down 5 plus days. RSI(2) 0.62.
Gol Linhas Aereas Inteligentes
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GOL |
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PowerRating): Short Term PowerRating 9. Down 5 plus days. RSI(2) 1.58.
Columbus McKinnon
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CMCO |
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PowerRating): Short Term PowerRating 8. Down 5 plus days. RSI(2) 0.92.
Learn more strategies for trading stocks in the short term with a free trial to our PowerRatings! The highest rated stocks have outperformed the average stock by a margin of more than 14 to 1 after five days! Click here to launch your free PowerRatings trial today!
David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.