I had the best hamburger on earth last night.
No, I am very serious, I am a burger aficionado having tried burgers from dives to top of the line bistros. While I have favorites, last night’s was special. It was not a traditional burger with simple ground beef. The recipe contained foi gras, truffles, sirloin and short ribs all mixed to perfection by the highly skilled, Daniel Boulard at his Bistro Moderne in New York City. The taste was exquisite.
Just like a great recipe distinguishes a winning burger from a mediocre one, the PowerRatings recipe locates winning stocks from the thousands of average ones and downright losers. In other words, this PowerRatings recipe will help you locate tasty stocks most likely to appreciate over the 1-day, 2-day and 1-week timeframes. The recipe is an easy three-step process that can be used again and again with proven results. This article will lay out this stock picking recipe and show you two stocks to consider.
The first and most critical step is to only look at stocks trading above their 200-day Simple Moving Average. This assures that a strong, long term up trend is in place, increasing the odds that you are not buying into a falling knife or catching a stock in a death spiral.
The second step is to drill deeper into the list locating stocks that have fallen five or more days in a row or experienced five or more consecutive lower lows. Yes, you heard me right- fallen five or more days in a row. I know this flies in the face of conventional wisdom of buying stocks as they climb higher. However, our studies have clearly proven that stocks are more likely to increase in value after a period of down days than after a period of up days.
The third and final step is a combination of whittling the list down to names whose 2-period RSI (RSI(2)) is less than 2 and the Stock PowerRating is 8 or higher.
The Stock PowerRatings are a statistically-based tool that is built upon 14 years of studies into the inner nature of stock prices. It ranks stocks on a scale of 1 to 10 with one being the most volatile and least likely for short term gains and 10 proven to be the most probable for gains over the next 5 days. In fact, 10-rated stocks have shown to have a 14.7 to 1 margin of outperforming the average stock in the short term.
The stocks that fulfill each of the above steps have proven in extensive, statistically valid studies to possess solid odds of increasing in value over the 1-day, 2-day and 1-week time frame.
Here are 2 stocks fitting the recipe for tasty short term gains:
Learn more strategies for trading stocks in the short term with a free trial to our PowerRatings! The highest rated stocks have outperformed the average stock by a margin of more than 14 to 1 after five days! Click here to launch your free PowerRatings trial today!
David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.