Here’s a PowerRatings Strategy to Trade Low-Priced Stocks
Today’s
PowerRatings strategy will focus on how you can use the 200-day simple
moving average,
2-period Relative Strength Indicator, and PowerRatings
to trade Low-Priced Stocks (<$10 per share).
PowerRatings
subscribers can access a list of the
Top 10 PowerRatings Low-Priced Stocks.
For
aggressive traders and investors, some of the biggest moves on a percentage
basis come from low-priced stocks. If you are willing to assume more risk, you
will find ample opportunities in low-priced stocks with high PowerRatings.
The logic behind the strategy is to find stocks
that are trending upwards (above the 200-day moving average), but are pulling
back. The 2-period RSI informs us that a stock has been selling off in
recent days and may be ready to bounce. The RSI reading we are looking for
is anything under 30. We then run the symbols through PowerRatings and
look for stocks with a rating of 7 or higher.Â
Here are a few charts from today’s
Top 10 PowerRatings Low-Priced Stocks.
Sonus Networks
(
SONS |
Quote |
Chart |
News |
PowerRating)
SONS is above its 200-day moving average (red line) and has
pulled back for 3 straight days. The RSI(2) reading is at an extreme low
(7.53), making a bounce likely in the next few days. Also, SONS has a
PowerRating
of 8, which historically has beaten the S&P 500 over the next 5 trading days.Â
The following charts also meet the above requirements. They should be put
on your watchlists and monitored.
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.
InPhonic Inc.
(
INPC |
Quote |
Chart |
News |
PowerRating)
Harmonic Inc.
(
HLIT |
Quote |
Chart |
News |
PowerRating)
Â
From 1995-2005,
stocks with a PowerRating of 8 have outperformed the S&P 500
index on average by an 8.3-to-1 margin, while a PowerRating of 10 doubles that
performance to 16.3.
PowerRatings also help indicate a stock’s
downside as well as timely short-sale entry points; PowerRatings of 1 and 2 have
on average lost money over the next week. A PowerRating of 1 typically
underperformed the S&P 500 by a 5-1 margin. Obviously, you should ideally be
looking to buy high PowerRating stocks and avoid (or short) low PowerRatings
stocks.
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
Want a free month of PowerRatings?
Send us your PowerRatings
strategy and receive one free month of this exciting trading tool. If you are
already a monthly or annual PowerRatings
subscriber, you will receive an additional three months if we publish your
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.
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