Mighty Tykes: 3 Ultra Low Priced, PowerRatings Stocks
Ultra low priced stocks pose particular challenges for the short-term investor. First, the shear number of names trading under $5.00/share is mind boggling. Secondly, choosing companies possessing the potential for outsized short-term gains from the myriad of choices is daunting.
While it is critical to keep in mind that certain liquidity, manipulation, and shock/volatility factor risks can exist within the low priced sector; the real dollar return benefits may be substantial.
Our Stock PowerRatings combined with the three step, easy to implement stock picking system places the odds firmly in your favor for locating low priced stocks most likely to outperform over the short-term. In this case, short-term refers to the 1, 2 and 5-day time frames.
The first part is the stock needs to trade above its 200-day simple moving average to be considered. This assures that shares are not in a death spiral into the abyss where few stocks ever return.
The Second part is to look at stocks whose 2-period Relative Strength Index (RSI(2)) is less than 2. Most traders use the standard 14-period RSI, but our studies discovered that there was no edge at this setting of the indicator. While RSI(2) has proven to produce significant edge to the short-term trader. (for additional information on this proven indicator click here).
The third and final part is to look only at stocks for short-term gains that have an 8 or above Stock PowerRatings.
The stocks that fulfill each of the above caveats 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 3 potential mighty tykes fitting all of the criteria for your consideration:
Avanir Pharma
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China BAK Battery
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Astrotech Corp
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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.