High PowerRating, Low Price: 5 Stocks for Swing Traders
Stocks are headed lower in the first few hours of trading on Thursday, with all three of the major indexes in the red and becoming increasingly oversold.
In an after hours commentary yesterday, I pointed out that because the Nasdaq was more oversold than the Dow and S&P 500, swing traders were more likely to find high quality pullbacks among the small cap and technology stocks of the Nasdaq.
National Coal Corporation
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PowerRating) Short Term PowerRating 9. RSI(2): 1.22
While this situation has not changed dramatically, the fact that we are seeing selling in both the Dow and the Nasdaq suggests that there may be a wider variety of quality pullbacks for traders to choose from in the near term.
Headwaters Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 10.73
So how do swing traders best approach pullbacks when the markets appear to be shifting from neutral to oversold?
Boots & Coots International
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PowerRating) Short Term PowerRating 8. RSI(2): 14.88
For one, traders should not be in a hurry. Buying weakness means waiting for stocks to become weak — and the weaker the better. Stocks that have been down for multiple consecutive days, or have gapped down by 10% or more in a short period of time … these are the signatures of the stocks swing traders want to be considering for trades when markets are starting to become increasingly oversold.
Triquint Semiconductor
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PowerRating) Short Term PowerRating 8. RSI(2): 17.79
Another factor to look for is low, 2-period RSIs — preferably in the single digits, ideally below 2 — where we have found a significant edge. Stocks such as those in today’s report, all of which have 2-period RSIs of more than 10, are stocks that traders should keep an eye on as the markets continue to correct. Those stocks that have PowerRatings of 8 and double-digit, 2-period RSIs today are the stocks that will have PowerRatings of 9 and single-digit, 2-period RSIs tomorrow.
RightNow Technologies Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 10.91
Of the five stocks in today’s report, two have Short Term PowerRatings of 9 and three have Short Term PowerRatings of 8. Our research into short term stock price behavior since 1995 indicates that stocks with Short Term PowerRatings of 8 have outperformed the average stock by a margin of more than 8 to 1 after five days. Stocks with Short Term PowerRatings of 9 performed even better in our historical testing, beating the average stock by a more than 13 to 1 margin after five days.
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David Penn is Senior Editor at TradingMarkets.com.