Finding Strong Stocks During a Market Pullback
Each day,
TradingMarkets publishes
7 Trading Ideas for Today, a selection of stocks from our daily indicators. TradingMarkets
Stock Indicators are based upon our latest quantitative research, and
highlight trading edges backed by our database of more than 7-million historical
simulated trades.
On Thursday, May
3, InterOil Corp.
(
IOC |
Quote |
Chart |
News |
PowerRating) was
a candidate from the
5+ Consecutive Down Days
list.
These are stocks that have closed down for five or more
consecutive days and are trading above their 200-day moving average.
Our research shows that stocks trading above their
200-day moving average that close down for five or more days have shown positive
returns, on average, 1-day, 2-days and 1-week later.
Historically, these stocks have provided traders with a
significant edge. To learn more about our
research into stocks that make five, or
more, consecutive down days, and how to use this information,
click here.
The
TradingMarkets mantra is to “buy weakness,” and that is exactly what you could
have done here. IOC was clearly in a strong uptrend, and the extremely oversold
conditions were a perfect setup for a classic mean-reverting bounce.
1-day later, IOC closed
+7.1%
2-days later, IOC closed +4.0%
5-days later, IOC closed
+6.2%
Obviously,
results like these do not occur every time, but
our quantified research clearly shows that the edges exist during extreme
oversold or overbought conditions.
Check out our
latest quantified research articles
here. If
you don’t already have a TradingMarkets subscription,
click here
for a free 7-day trial. Check back daily for more 7 Trading Ideas for Today,
and develop your own watchlist of stocks with historically-backed edges.
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.