For every stock like USG (NYSE: USG) that makes our Stock of the Week, there are several, far lesser known stocks that have pulled back into oversold territory, earned top ratings, and rallied into strength that the average trader has never heard of.
By focusing on quantified edges, rather than the glamour appeal, PowerRatings help short-term traders block out the news and the noise, making it easier to find the stocks that are poised to make big moves every market day – whether or not they are making the news headlines or trending on Twitter.
An example of this kind of little known stock is 3Sbio Inc. (NASDAQ: SSRX), a Chinese biotechnology company that trades on the Nasdaq. Shares of SSRX had begun to sell off at the end of March after rallying to new highs. But within two days of of those highs – and of earning “consider avoiding” ratings of 1 out of 10- SSRX began to fall, closing lower for three days in a row and earning “consider buying” ratings of 8 out of 10 as April began.
For conservative traders, ratings of 8 often serve as an alert to potentially even more oversold conditions ahead. And just one day after earning its 8 ratings, shares of SSRX dropped again as sellers continued to pressure the stock, sending SSRX into technically oversold territory above the 200-day moving average. This additional selling can be credited for boosting the stock to our highest rating of 10 out of 10, signifying a market that has pulled back to levels where traders, historically and statistically speaking, have tended to be more inclined to buy in the short-term than sell.
Traders relying on the tactic of intraday entries to secure the lowest possible price in the trade would have to wait a few more days before they would be able to take high probability positions in the stock. SSRX traded lower following its initial upgrade to 10 out of 10, even earning a second 10-rating. But the stock did not sell-off enough to allow most traders to buy in on the following day.
Fortunately, with a second 10-rated session, traders were able to take a second shot at follow-through to the downside in the wake of a top-rated close. On April 9th, SSRX opened near the lows of the day, giving traders who use a standard, 3% limit order for their intraday entries the opportunity not just to take a position in the stock, but to take a position near the absoute session low in SSRX.
The opportunity to exit the trade came relatively quickly, with SSRX rallying to close above its 5-day moving average just three days later. For traders and active investors who used intraday entry tactics to buy into the stock when it traded near session lows on the 9th, the move in 3Sbio Inc. represented a gain of more than four and a half percent.
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David Penn is Editor in Chief of TradingMarkets.com