Here’s a PowerRatings strategy for momentum traders
Today’s article looks at how to combine
PowerRatings with the TradingMarkets
Pullback List.
Most successful momentum-based traders and money managers like to buy strong
stocks after they pull back. TradingMarkets.com uses a proprietary mathematical
model to identify up to 30 (in weak or choppy markets there will be fewer) of
the strongest stocks that have pulled back from recent highs. These stocks
should be considered potential candidates to resume their longer-term uptrends.
To learn more about how to trade pullbacks successfully,
click here.
The list for 07/20/06 contains 30 candidates. 6 of the 30 don’t qualify for
PowerRatings. Of the remaining 24, only 4 have high PowerRatings (7-10) and are
trading above their 200-day
moving averages,
making them potential buy candidates.
Amerigroup
(
AGP |
Quote |
Chart |
News |
PowerRating)
Google
(
GOOG |
Quote |
Chart |
News |
PowerRating)
j2 Global Communications
(
JCOM |
Quote |
Chart |
News |
PowerRating)
Wimm Bill Dann Foods
(
WBD |
Quote |
Chart |
News |
PowerRating)
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.
Over the same test period (1995-2005), stocks with a PowerRating of 1, 2 or 3 have underperformed the
S&P 500 over the next five-days. The 1’s have performed 4.9 times worse than the
S&P 500, the 2’s have performed worse than the S&P 500, and the 3’s have only
managed 90% of the S&P 500 performance.
You can
attend a free
class on how to use
PowerRatings,
presented by Steve Primo, our Director of Education.
Click here
to take a free trial of
PowerRatings.
Ashton Dorkins
Editor-in-Chief
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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.