Nasdaq Trading Strategies for Short Term Traders: SQNM, SKYW, PALM
Going into trading on Tuesday, the Nasdaq is leading both the Dow 30 and the S&P 500 deeper into overbought territory. This is due in large part to the strength in technology stocks. Note that technology ETFs like the Technology Select Sector SPDRS ETF, XLK
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PowerRating) is even more overbought than the Nasdaq based on its 2-period RSI.
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This means that the time is drawing near for short term stock and ETF traders to consider opportunities to wager against the increasingly overbought Nasdaq. One approach is to simply sell short exchange-traded funds like the PowerShares QQQ Trust ETF, QQQQ
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All this notwithstanding, there are a few stocks in the Nasdaq making pullbacks that short term traders may want to consider for trades to the upside – in concert with or instead of betting against the Nasdaq. The three stocks I am thinking of in particular all have Short Term PowerRatings of 8, making them part of that cohort of stocks which, according to our research, have outperformed the average stock by a margin of more than 8 to 1 after five days.
Sequenom Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 17.40
The 2-period RSIs on these three stocks range from as low as 8 to as high as 35. Note that ideally we like to focus on stocks that not only have high Short Term PowerRatings of 8 or higher, but also the lowest possible 2-period Relative Strength Index values. We have found the strongest edges in the short term with stocks that have 2-period RSIs of less than 2. As such, when it comes to the 2-period RSI, the lower the level the better.
Skywest Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 8.88
This was a point I made in yesterday’s column, “High PowerRating, Low RSI: A Winning Combination for Traders.” Successful short term trading in many ways is about having as many edges on your side as possible. Waiting for these edges to develop – whether they are PowerRatings upgrades, lower RSIs or less overbought markets – is no less important than the eventual execution of actual trades.
Palm Inc.
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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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David Penn is Editor in Chief at TradingMarkets.com.