PowerRatings and Momentum Trading
A fairly uneventful trading session on Monday led to the now-familiar pattern of late day selling as all three of the major market indexes lost 2% or more going into the close.
Which leads us to another very familiar pattern for swing traders: sitting on the sidelines.
I’ve referred to the current market as a strong-get-stronger market, the kind of momentum market in which stocks in uptrends continue to advance without pullback, and stocks in downtrends continue to fall without pause. In such markets, the edges go to the trend trading crowd, the trailing-stop bunch who require extended moves in a single direction in order to cover the inevitable “give back†when the trade reverses and they are forced to sell their long trades into weakness or cover their shorts on strength.
Swing trading in general, and swing trading with our Short Term PowerRatings in specific, takes advantage of the other side of that trade. Like a value investor, the swing trader looks for instances of undervaluation (oversold) and overvaluation (overbought) in order to spot opportunity, profit from it, and move on.
That said, Short Term PowerRatings can be an excellent tool for momentum traders, as well, helping ensure that they don’t overstay their welcome in a long or short trade that may be increasingly vulnerable to reversal.
Low Short Term PowerRatings in stocks trading above the 200-day moving average can be used by momentum traders to know when it is time to take partial profits or to tighten stops. At the same time, high Short Term PowerRatings in stocks trading below the 200-day moving average can be effective ways for momentum traders selling stocks short to spot when a stock may be in the process of becoming too oversold and likely to bounce.
Timing is at the heart of all sound trading, whether it is swing trading or momentum trading. Our Short Term PowerRatings are one way that swing traders and momentum traders alike can know when to say when.
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.