Combine PowerRatings with Our Most Popular Indicator
Here at TradingMarkets we firmly believe in
historical backtesting to prove an indicator or system’s edge before we publish
it, so that our readers can trade with confidence. Today we will look at
one of our favorite indicators-
The 2-Period RSI Indicator.
One of the most
popular technical indicators used by traders today is the Relative Strength
Index (RSI). RSI values range between 0 and 100, with 0 showing extreme
weakness and an oversold condition. Today we will focus on stocks with an RSI
below 2. These stocks have shown positive returns, on average, over the
next 1-day, 2-days, and 1-week later.
 Click
here for more detailed information on RSI research.
We looked at over seven
million trades from 1/1/95 to 6/30/06*. The table below shows the average
percentage gain/loss for all stocks during our test period over a 1-day, 2-day,
and 1-week (5-days) period. These numbers represent the benchmark which we use
for comparisons.
The best results were achieved with a 1-week hold time. Let’s take a look at the 2-period RSI below 2
list from the close of 6/11/07:
Here are some daily charts from today’s 2-Period
RSI Below 2 above:
Penn National Gaming
(
PENN |
Quote |
Chart |
News |
PowerRating)
Cypress Biosciences
(
CYPB |
Quote |
Chart |
News |
PowerRating)
Nexstar Broadcasting Group
(
NXST |
Quote |
Chart |
News |
PowerRating)
If you would like to attend a free class which covers this
research and strategy further, please
click here
for the calendar of the upcoming online classes. Topics
covered include our latest research on
entries and exits, and
how to use PowerRatings with our new
Preferred Stock List.
For a free PowerRatings trial,
click here. If
you have any questions about PowerRatings or the new Stock Indicators please
feel free to email us or call 213-955-5858 ext 1.
Darren Wong
Associate Editor
Reminder: We are in no way recommending the purchase or short sale of these
stocks. This article is intended for education purposes only. Trading should be based on your own understanding of market conditions,
price patterns and risk; our information is designed to contribute to your
understanding.
*Our research
looked at 7,050,517 trades from Jan 1, 1995 to June 30, 2006. We applied a price
and liquidity filter that required all stocks be priced above $5 and have a
100-day moving average of volume greater than 250,000 shares.