High PowerRating, Low Price: 5 Stocks for Swing Traders
Stocks staged a late-day sell-off on Wednesday, turning a moderate decline into a near torrential downfall. The Dow closed lower by more than 400 points.
Falling stocks make for opportunities for swing traders who buy on weakness. But the current environment, in which the major market indexes continue to trend below their 200-day moving averages, is one to which swing traders should apply a great deal of caution.
The most important point, as I mentioned recently, is only buying stocks that are trading above their 200-day moving averages. Our historical research is as clear on this point as any other. The odds simply are not on the side of the trader, least the short term swing trader, who consistently buys stocks that are trading below their 200-day moving averages.
Another important point is diversification. If you trade multiple stocks, then it is important that your portfolio not end up resembling a sector fund because all of your positions are in energy stocks, or financial stocks, or semiconductor stocks. Owning too many stocks from the same sector is another form of leverage — often an unintended one — that can expose your trading portfolio to larger and more sudden losses than is necessary.
A last technique worth keeping in mind is position sizing. By dividing your trading portfolio into 10, 15 or even 20 different tranches, with each tranche representing its own trade, the likelihood of any one position having an outsized effect on your portfolio is minimized.
Sapient Corporation
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SAPE |
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PowerRating) Short Term PowerRating 9. RSI(2): 0.11
Telecommunication System Inc.
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TSYS |
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PowerRating) Short Term PowerRating 9. RSI(2): 4.20
Coldwater Creek Inc.
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CWTR |
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PowerRating) Short Term PowerRating 9. RSI(2): 1.81
Parlux Fragrances Inc.
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PARL |
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PowerRating) Short Term PowerRating 9. RSI(2): 0.59
Penson Worldwide
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PNSN |
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PowerRating) Short Term PowerRating 9. RSI(2): 1.48
All five stocks in today’s report have Short Term PowerRatings of 9. Reviewing millions of simulated short term stock trades between 1995 and 2007, we discovered that stocks with Short Term PowerRatings of 9 outperformed the average stock by a margin of more than 13 to 1 over the same time period.
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