Combine these two powerful tools to improve your trading

  • September 13, 2006
  • Darren Wong

Today’s

PowerRatings article is going to focus on combining
TradingMarkets
Pullbacks from Lows with PowerRatings. 

Most
successful momentum-based traders and money managers like to sell weak stocks
after they pull back. TradingMarkets.com uses a proprietary mathematical model
to identify up to 20 (in strong or choppy markets there will be fewer) weak
stocks that have pulled back from recent lows. These stocks should be considered
potential candidates to resume their longer-term downtrends. To learn more
about how to trade pullbacks successfully,

click here.

Looking at the top 10 candidates for 09/13/06, 6 out of the 10 qualify for a PowerRating of
3 (or lower). Simple

moving averages
are listed as follows: 20-day (yellow), 50-day (blue), and 200-day (purple).


Costco Wholesale
(
COST |
Quote |
Chart |
News |
PowerRating)

Isle of Capri Casinos
(
ISLE |
Quote |
Chart |
News |
PowerRating)

Kirby Corp.
(
KEX |
Quote |
Chart |
News |
PowerRating)

Accredited Home Lenders
(
LEND |
Quote |
Chart |
News |
PowerRating)

Swift Transportation
(
SWFT |
Quote |
Chart |
News |
PowerRating)

Tractor Supply Co.
(
TSCO |
Quote |
Chart |
News |
PowerRating)

 

From 1995-2005,
stocks with a PowerRating of 8 have outperformed the S&P 500
index on average by an 8.3-to-1 margin, while a PowerRating of 10 doubles that
performance to 16.3.

PowerRatings also help indicate a stock’s
downside as well as timely short-sale entry points; PowerRatings of 1 and 2 have
on average lost money over the next week. A PowerRating of 1 typically
underperformed the S&P 500 by a 5-1 margin. Obviously, you should ideally be
looking to buy high PowerRating stocks and avoid (or short) low PowerRatings
stocks.


Reminder: We are in no way recommending the purchase or short sale of these
stocks. 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.

You can attend
a free class on how to use

PowerRatings, presented by Steve Primo, our Director of Education.

Click here to
try

PowerRatings for yourself, risk free.

Darren Wong

Associate Editor

darrenw@tradingmarkets.com

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