Nasdaq Trading Strategies: 5 Oversold Stocks for Traders
As they did on Friday, stocks are taking a breather in the first hours of trading on Tuesday following another sharp sell-off led by financial stocks.
Could it be true that over the past few days, the Nasdaq has actually held up better than the S&P 500 and Dow industrials? Looking at charts of all three major indexes, we can see the while both the S&P 500 and Dow industrials have broken down decisively below last week’s lows, the Nasdaq’s pullback has been more of a sideways affair.
United Therapeutics Corporation
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UTHR |
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PowerRating) Short Term PowerRating 8. RSI(2): 2.43
It is possible that this relative strength advantage for the Nasdaq is a temporary phenomenon. But for the time being, it represents a potential opportunity among the smaller stocks that might be missed by pundits increasingly focused on the fortunes of large cap financial stocks.
Spartan Stores Inc.
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SPTN |
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PowerRating) Short Term PowerRating 8. RSI(2): 12.60
To this end, I am focusing on pullbacks in Nasdaq stocks for today’s report. Interestingly, all five stocks here have Short Term PowerRatings of 8. We found, after analyzing millions of simulated short term stock trades between 1995 and 2007, that stocks with Short Term PowerRatings of 8 have outperformed the average stock by a margin of more than 8 to 1 after five days.
Ultratech Inc.
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UTEK |
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PowerRating) Short Term PowerRating 8. RSI(2): 5.57
This five day period represents what short term stock traders have long recognized as the “sweet spot” for traders looking to get into and out of trades based on a singular stock reaction (i.e., an oversold bounce or an overbought correction). Our approach to short term trading is to look for our exits almost immediately after we take positions. This helps keep us focused on taking profits from the single, reaction move that markets that reach extremes tend to make.
Netlogic Microsystems Inc.
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NETL |
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PowerRating) Short Term PowerRating 8. RSI(2): 2.66
What is especially interesting about this set of 8-rated stocks is that a number of them – UTHR, NETL, and ULTI – have exceptionally low 2-period RSIs of less than 3. We found that stocks with 2-period RSIs of less than 2 have produced positive returns in one-day, two-day and one-week. This should provide an indication of the upside potential for a number of these stocks with 2-period RSIs that are nearing these extreme levels.
Ultimate Software Group Inc.
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ULTI |
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PowerRating) Short Term PowerRating 8. RSI(2): 2.37
Does your stock trading need a tune-up? Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of nearly 17 to 1 after five days.
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Whether you have a trading strategy of your own that could use a boost or are looking for a way to tell the stocks that will move higher in the short term from the stocks that are more likely to disappoint, our Short Term PowerRatings are based on more than a decade of quantified, backtested simulated stock trades involving millions of stocks between 1995 and 2007. Click the link above or call us at 888-484-8220, extension 1, and start your free trial today.
David Penn is Senior Editor at TradingMarkets.com.