High PowerRating, Low Price: 5 Stocks for Swing Traders
Stocks finished lower on Tuesday, after reaching overbought extremes only a day ago.
Writing for Monday morning’s column, I pointed to what I called a “target rich†environment. This was the market environment late last week as consecutive down days drove stocks lower and created a growing number of high Short Term PowerRating trading opportunities.
What I did not suspect was how fleeting that environment might be. Extremely oversold as of the Friday close, the markets were besieged with buyers who stepped in immediately on Monday — covering shorts and taking on more than a few speculative positions.
One reason why I suspect there might have been a few speculative bottom-feeders among the bunch of buyers on Monday is the large amount of selling we saw on Tuesday. I’m unconvinced that traders were that ready to take new short positions so soon after the ideal short term decline the markets provided last week. We ourselves were looking at opportunities to short the market, but believed those opportunities would be more likely to arrive in the second half of the week rather than the first.
That the markets sold off as aggressively as they did on Tuesday means that we are coming up on another “target rich†environment sooner than expected. But our methodology remains the same: look for the highest Short Term PowerRatings stocks with the lowest 2-period RSIs, and then wait for those stocks to pullback further on an intraday basis (anywhere from 2-6% below the previous close) before taking positions. This is all the more important with the markets being as volatile as they’ve been.
Here are five stocks that traders may want to keep an eye on over the next few days. Again, let high Short Term PowerRatings and low 2-period RSIs be your guide.
Sapient Corporation
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PowerRating) Short Term PowerRating 9. RSI(2): 13.63
Palm Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 4.44
Extreme Networks Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 5.05
Rentech Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 0.368
Quantum Fuel Systems
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PowerRating) Short Term PowerRating 8. RSI(2): 0.253
Of the five stocks in today’s report, four have Short Term PowerRatings of 9 and one has a Short Term PowerRating of 8. We found that stocks with Short Term PowerRatings of 8 outperformed the average stock by a margin of more than 8 to 1 after five days. That same research indicated that 9-rated stocks were even more impressive, outperforming the average stock by a margin of more than 13 to 1 after five days.
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