How a Gap Down Can Turn Into a Winning Trade
Each day,
TradingMarkets publishes
7 Trading Ideas for Today, a selection of stocks from our daily indicators. TradingMarkets
Stock Indicators are based upon our latest quantitative research, and
highlight trading edges backed by our database of more than 7-million historical
simulated trades.
On Thursday,
March 15, Bradley Pharmaceuticals
(
BDY |
Quote |
Chart |
News |
PowerRating) was
the candidate from the
Gaps Down 5% or More
list.
These are stocks that gap
down by 5% or more and are trading above their 200-day moving average. Our
research shows that stocks trading above their 200-day moving average that gap
down by more than 5% have shown positive returns, on average, 1-day, 2-days and
1-week later. Historically, these stocks have provided traders with a
significant edge.
The
TradingMarkets mantra is to “buy weakness,” and that is exactly what you could
have done here. Last Wednesday, BDY missed earnings, and the media emphasized
that the stock
“got punished” that day. On television, in print and online,
journalists warned off weakness in the biotech sector. After a
considerable gap down last Thursday, BDY is trading at the same price it was
before the missed earnings and gap down.
1-day later, BDY closed +1.9%
2-days later, BDY closed +8.5%
5-days later, BDY closed +15.2%
Obviously,
results like these do not occur every time, but
our quantified research clearly shows that the edges exist during extreme
oversold or overbought conditions.
Check out our
latest quantified research articles
here. If
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click here
for a free 7-day trial. Check back daily for more 7 Trading Ideas for Today,
and develop your own watchlist of stocks with historically-backed edges.
John Lee
Associate Editor