Down But Not Out: 3 Stocks for Swing Traders
Stocks ended the day lower on Tuesday, marking the fifth consecutive down session for both the S&P 500 and Dow industrials.
Over the past few days, I have suggested that stocks remain vulnerable to a downturn. I base this observation on the research done by Larry Connors which reveals that stocks have a historical tendency to underperform when the VIX, or CBOE Volatility Index, is stretched significantly below its 10-day moving average. And although the VIX was somewhat higher on Tuesday, it still remains more than 10% below its 10-day moving average.
At the same time, I have also pointed out that the quality of our Top 25 PowerRatings Stocks has improved over the past few days. Looking at that roster now, after Tuesday’s close, I spot 15 stocks out of 25 that have Short Term PowerRatings of 8 and are trading above their 200-day moving averages. Suffice to say that it has been several weeks since stocks have been even moderately attractive to the longside. And “moderately attractive” is how I would characterize many oversold stocks above the 200-day moving average right now.
As such, my suggestion for short term stock traders going forward remains the same: look for short term opportunity to the upside in specific stocks while in the midst of what still looks to be general stock market weakness. I have listed 3 stocks below which, in addition to the five stocks highlighted in yesterday’s “5 PowerRatings Stocks for the Next 5 Days” column, should be the kind of stocks that short term traders are focusing on in the near term.
Universal Technical Institute Inc.
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UTI |
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PowerRating) Short Term PowerRating 8. RSI(2): 4.36
Panera Bread Company
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PNRA |
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PowerRating) Short Term PowerRating 8. RSI(2): 5.87
Granite Construction Inc.
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GVA |
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PowerRating) Short Term PowerRating 8. RSI(2): 4.13
Recall that stocks with Short Term PowerRatings of 8, according to our research into short term stock price behavior since 1995, have outperformed the average stock by a margin of more than 8 to 1 after five days.
What is most remarkable about this set of stocks is that not only do they have high Short Term PowerRatngs, but also their 2-period RSIs are all in the low single digits. In the recent past, I’ve come across 8-rated stocks, for example, that are trading above their 200-day moving averages. But the missing ingredient has been the kind of low, 2-period RSI that confirms that the stock under analysis is truly oversold. As of the fifth consecutive selling day in the S&P 500 and Dow industrials, it appears as if that ingredient is back in the mix.