How PowerRatings gives me an edge

As an investor, you are buying stocks or mutual funds with the goal of achieving
long term capital appreciation. Ten years from now, you hope that your purchases
have increased in value. You may do a periodic rebalancing of your portfolio,
but you are not attempting to catch the ups and downs of a market. If you buy
mutual funds, you are letting the fund manager make those decisions for you.

As a trader you are attempting to capture profit from the daily up and down
movement in the broad markets and individual stock prices. You start out by
buying a stock for whatever reason. Perhaps a friend gives you a stock tip to by
XYZ for $5.00 and it goes to $6.00 and you sell the stock for a profit. You try
buying the stock again and it works again. You start telling yourself how easy
this really is. You never develop a game plan or a method. Just buy the stock
low and sell it high. You like the fact that you made some easy money. In the
go-go years of the late 90’s many people found that they could buy a stock and
sell it for a profit with little effort or research. As most people found out in
the year 2000, the lack of a game plan will result in giving all your profits
back and perhaps more. I have talked with many people that have a similar story
to tell.

If you want to succeed as a trader, you have to have a game plan. You must find
an edge that will give you the probability to select the stocks that will more
likely go up than down, or select the stocks that are more likely to go down
than up, if you are selling short.

I must stress again: There are no guarantees of a stock’s direction. Only a bias
or predisposition based on the setup.

So what is the basis for finding stocks that have a bias up or down? Larry
Connors has done much research to mathematically determine if there is a certain
situation that creates a bias for profit. In his latest book, “How
Markets Really Work” Larry established that buying pullbacks in prices
created a higher probability situation for selecting a profitable trade. This is
easy to say, but much harder to do. When is the right pullback to buy and
conversely, the right rally to sell?

Larry and the Connors Research Group have spent countless hours evaluating
mathematical formulas to find the right situations to answer this question. Over
the last 2 and ½ years, TradingMarkets has published different systems to this
end. I have and continue to trade several of these systems profitably.

Let me recap a trade from the PowerRatings for you. On March 8, I saw a rating
of 10 on a member of the NASDAQ 100 index. The component was Intuitive Surgical
(
ISRG |
Quote |
Chart |
News |
PowerRating). I have not seen a component symbol of either the S&P 500 or the
NASDAQ 100 have a PowerRating this high before. So ISRG was on my watch list for
trading on Thursday morning.

I bought the stock within a minute of the opening. It opened above yesterday’s
close and there was no evidence of any selling pressure. The stock started
higher and moved up very quickly. I exited half of my initial position near a
resistance area from the prior 3 days. I did add to my position on the pullback
below the open as the price held above the moving averages. I exited when we
again tested the resistance area and failed. I did not take any more trades in
the stock as it formed a consolidation for the rest of the day. The stock was
again on my watch list this morning. I identified the resistance area from
yesterday’s consolidation and wanted to get long if the price moved above that
area. When the NASDAQ 100 index began to rally this morning, ISRG traded through
resistance and I went long. As of this article I am out of the majority of my
position and evaluating where to exit the remainder.

It has not been the best of weeks to look for long candidates. But
PowerRatings have helped me find the right stocks to look at for long
candidates despite the market’s weakness.