How to Find Strong Candidates That Are Pulling Back
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.
Apparel store company Genesco
(
GCO |
Quote |
Chart |
News |
PowerRating)
showed up on our
2-Period RSI
Below 2
list (explained
below) last
Tuesday, May 15. This stock is up 37.6% since the beginning of the year and has a 52-week range of $25.50
to $51.50. This stock definitely has some major momentum behind it
and should be monitored for potential pullback opportunities. Let’s
look at one strategy to enter into into these types of momentum stocks.Â
The main theme
of our trading philosophy here at TradingMarkets is to
“buy weakness,”
and that is exactly what you could have done with GCO when it appeared on our
list last week. Let’s take a look at the RSI indicator and the daily chart
to see how things played out.
1-day later, GCO closed
-0.6%
2-days later, GCO closed -1.4%
5-days later, GCO closed
+4.1%
These are stocks that have a 2-period RSI reading below 2 and are trading above
their 200-day
moving average. Our research shows that stocks trading above their
200-day moving with a 2-period RSI reading below 2 have shown positive returns,
on average, 1-day, 2-days and 1-week later. Historically, these stocks have
provided traders with a significant edge. To learn more about our research into
stocks that have a 2-period RSI below 2, and how to use this information,
click here.
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
you don’t already have a TradingMarkets subscription,
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.
Darren Wong
Associate Editor
Reminder: We are in no way recommending the purchase or short sale of
these stocks. This article is intended for education purposes only. Trading
should be based on your own understanding of market conditions, price patterns
and risk; our information is designed to contribute to your understanding.