Combine PowerRatings with
‘Trading Windows’ setups
Today’s article looks at how to combine
PowerRatings with the TradingMarkets
Long Windows Candidates list.
These are stocks
which are in a strong uptrend, as determined by a proprietary trend filter and
whose current bar has its highs below the 4-day
moving average.
Historically, these stock on average have had a larger than normal short-term
upside reversals. In order for us to be a buyer of a “Trading Window”, we must
have a 10-period ADX reading of 30 or higher and a +DI reading above the -DI
reading. Or we must have a 14-period +DI of 30 or higher (with no ADX reading
required). In order for us to have a sell signal, the 10-period ADX must be 30
or higher and the -DI must be greater than the +DI. Or we must have a 14-period
-DI reading of above 30 (with no ADX reading required). “Single Windows” are the
most common type of Windows. They are simply a single bar which has its low
trading above the 4-period moving average or its high of the day below the
4-period MA. You will enter tomorrow if the market trades above today’s high
(for buys) or below today’s low (for sells).
The list for 07/12/06 contains 4 candidates. Only 1 out of those 4 has a high
PowerRating.
C.H. Robinson Worldwide
(
CHRW |
Quote |
Chart |
News |
PowerRating)
1. Today’s high is below the 4-day MA.
2. The 10-day ADX (green line) is above 30.
3. The +DI (blue line) is above the -DI (red line).
From 1995-2005, stocks rated 7 have outperformed the S&P 500 by a better than
4-1 margin over a five-day period. Stocks rated 8 have outperformed the S&P 500
by a better than 8-1 margin; stocks rated 9 have outperformed the S&P 500 by a
13-1 margin, and those stocks that have achieved a 10
PowerRating have
outperformed the S&P 500 by a 16.9-1 margin.
Over the same test period (1995-2005), stocks with a PowerRating of 1, 2 or 3 have underperformed the
S&P 500 over the next five-days. The 1’s have performed 4.9 times worse than the
S&P 500, the 2’s have performed worse than the S&P 500, and the 3’s have only
managed 90% of the S&P 500 performance.
You can
attend a free
class on how to use
PowerRatings,
presented by Steve Primo, our Director of Education.
Click here
to take a free trial of
PowerRatings.
Ashton Dorkins
Editor-in-Chief
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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. Controlling risk through the use of protective stops is critical.