Nasdaq Trading Strategies for Swing Traders
Stocks are mixed in the first half of trading following yesterday’s oversold rally.
As of Tuesday’s open, both the Dow industrials and S&P 500 are overbought, with 2-period RSIs that are high and climbing. This tells us that traders looking to buy pullbacks from among the blue chip stocks will likely have to wait for a few more days while these overbought conditions are worked off. On balance, the Dow industrials are the most overbought, with an intraday 2-period RSI of more than 80. The S&P 500 is next with a 2-period RSI that is at least ten points lower.
Integral Systems Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 0.463
The Nasdaq is a different case. While both the Dow industrials and S&P 500 have benefited from the strength of financial stocks whenever traders have been in a buying mood, the Nasdaq and its tech stocks already appear to have fallen somewhat out of favor. As such, the Nasdaq is increasingly a place where traders can look for potential opportunity, while waiting for the rest of the market to cool down and – eventually – sell-off again.
Cyberonics Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 3.57
Compared to the Dow industrials and S&P 500, the Nasdaq is in a neutral position between overbought and oversold (almost mathematically so, with an intraday 2-period RSI of about 51). So while we don’t see an overwhelming number of high Short Term PowerRatings stocks – particularly 9- and 10-rated stocks – anywhere in the market, a significant number of those we do see are in the Nasdaq.
Taleo Corporation
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PowerRating) Short Term PowerRating 8. RSI(2): 15.78
So what is the game plan for swing traders right now? In the same way that stocks oscillate between overbought and oversold, swing traders need to move back and forth between patience and agility, being willing to wait for the right opportunities to present themselves and able to pounce when the rest of the trading world is in a panic and frozen with indecision.
Superior Well Services
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PowerRating) Short Term PowerRating 8. RSI(2): 0.602
Right now, we are in the patience phase, looking for intraday weakness in those stocks that, at this moment, refuse to follow the markets higher. Even amid yesterday’s bullishness, there remain more than a few oversold stocks – again, especially in the Nasdaq – that traders should keep an eye on over the next few days.
Volterra Semiconductor
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PowerRating) Short Term PowerRating 8. RSI(2): 5.43
Of the five stocks in today’s report, two have Short Term PowerRatings of 9 and three have Short Term PowerRatings of 8. We found 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.
Stocks with Short Term PowerRatings of 9 have fared even better than stocks with Short Term PowerRatings of 8. From 1995 to 2007, stocks with Short Term PowerRatings of 9 have outperformed the average stock by a margin of more than 13 to 1 after five days.
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David Penn is Editor-in-Chief at TradingMarkets.com.