Here’s A New Way Of Finding Outperforming Stocks
Today’s
PowerRatings article will show you a strategy combining the
TradingMarkets Stock Scanner
(if you’re not a member,
sign up for a free trial) and PowerRatings.
Finding strong stocks is easy with our stock
scanner. In this example we will look for stocks that have a high 12-month
Relative Strength reading along with a low 3-month Relative Strength reading.
This combination scans for stocks that have been showing strength over a longer
period of time, but are recently pulling back. 12-month Relative Strength
is the relative price performance rank over the last 250 trading days against
the 5,000 most actively traded stocks in our database. Ranks are 1 to 99 with
higher numbers representing stronger performance. We will scan for stocks
with RS (12 month) rankings of 90 or higher and RS (3 month) of 30 or lower.
Here is a what the inputs will look
like:
I have also included other parameters to help
shorten our list of resulting stocks. I prefer to trade stocks that are between
$20.00 and $30.00 in price. Also, I look for stocks that have a good
degree of liquidity, so that entries and exits can be made more easily.
Therefore, I inserted 2500 and 10000 into the 50-day average volume box (The
volumes are in 100’s, so inputting 2500/10000 means you are looking for daily volume above
250,000 and below 1,000,000).
Here is a partial list of the scan
results:
We can then check each resulting stock’s
PowerRatings. The stocks rated 7 or higher would be put on your watch
list.
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.
You should not consider any of these stocks as
“buy candidates.” Rather they are a starting point in your search for strong
stocks that fit your own strategy’s trading criteria.
Here are a few charts from stocks rated 7 or
higher:
Charlotte Russe Holding, Inc.
(
CHIC |
Quote |
Chart |
News |
PowerRating)
Brush Engineered Materials
(
BW |
Quote |
Chart |
News |
PowerRating)
Companhia Siderurgica Nacional Ads
(
SID |
Quote |
Chart |
News |
PowerRating)
Technitrol
(
TNL |
Quote |
Chart |
News |
PowerRating)
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
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strategy.
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.