Find the Best Stocks to Trade Next Week
Since the Federal Reserve cut the Fed Funds rate and the discount rate by 50
basis points, the S&P 500 index has rallied +3.5%. Despite the major rally, many
professional investors and analysts are looking for more bad news to come from
the credit and housing market. Some are even watching for an upcoming recession,
with the dollar hitting record lows and commodities rising fast. How do you base
your trading decisions in a volatile, even downright hostile, trading
environment?
At TradingMarkets, we approach stock trading with an emphasis on finding “the
edge.” If you are making trades without an edge, you are simply gambling your
money on price movement. If you are making trades with an edge, however, you are
hedging your bets that a historically quantified pattern will repeat itself,
providing you with a greater chance of success.
We have quantified a number of different edges using a number of different
indicators. It follows logically that using two separate indicators, both backed
by historical data, will give you an even greater edge than you would have using
just one.
TradingMarkets Stock Indicators have been quantified in millions of
backtested trades. These lists represent a snapshot of stock behaviour,
highlighting overbought and oversold conditions in a simple list form. Here is
today’s
5+ Consecutive Highs list, which will be available free to the public
until Monday. These are stocks that have made a higher high for five or more
consecutive days and are trading below their 200-day moving average. Our
research shows that stocks trading below their 200-day moving average that make
higher highs for five or more days have shown negative returns, on average,
1-day, 2-days and 1-week later. Historically, these stocks have
provided traders with a significant edge.
A quick and easy way to prioritize potential stock trades is to use another
indicator as a filter. We’ll use our PowerRatings (for Traders) indicator;
clicking the tab labeled “PowerRatings” on the table will list the stocks in
order of their PowerRatings. Right off the bat, we see an Internet giant, Yahoo,
with a PowerRating (for Traders) of 2. A PowerRating of 2 denotes overbought
conditions, and the historical data points to a bearish edge. With a low
PowerRatings and after making new consecutive highs for the past five days,
Yahoo has a historical bias to the downside over the next five trading days.
