Here’s a way of using PowerRatings list of 9’s and 10’s
Today’s
PowerRatings
strategy is going to show you how they can be used as an indicator for the broad
market. You can do this by monitoring the list of stocks with
PowerRatings
of 9’s and 10’s, while also monitoring the list of stocks with
PowerRatings
of 1’s and 2’s.
When there are lots of 9’s and 10’s there are
lots of good buying opportunities. Conversely, when there are very few 9’s and
10’s there are very few good buying opportunities. Therefore when there are lots
of 1’s and 2’s there are lots of good selling opportunities, and when there are
very few 1’s and 2’s, there are very few good selling opportunities. This
information is very useful because it gives you a clue as to whether the market
is overbought or oversold.
Two days ago the S&P500 hit a 5-year high. The
significance of this fact is debatable at best, but nonetheless most media
commentators view such things as being bullish. However, a quick glance at the
list of 9’s and 10’s would immediately tell you there were very few good
buying opportunities — indicating the market is overbought. If you then look at
the
list of 1’s and 2’s you’ll find a long list of selling opportunities.
This information may seem useless after the
market has declined but it was actually available before yesterday’s selloff.
And, if you learn how to use it, then you can take the right action next time
you spot something similar.
Below is a chart of the S&P500. On 02/21/06 there
were only two stocks (
(
IDSY |
Quote |
Chart |
News |
PowerRating) and
(
SNDK |
Quote |
Chart |
News |
PowerRating)) with a
PowerRating
of 9. On 02/22 and 02/23 there were three 9’s. On
02/24 there were two 9’s and then finally on 02/27 there was only one 9 (with no
10’s on any of these days). On 02/28 the S&P500 lost almost 16-points!
As you can see the S&P500 declined over the 5-day
period. But, if you had stuck with the two stocks that had a
PowerRating
of 9 on 02/21 you would have been up 10.40% and
7.75%. Below are the charts for IDSY and SNDK.
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PowerRatings
presented by Steve Primo, our Director of Education.
Ashton Dorkins
Editor-in-Chief