PowerRatings and the Post Sell-Off Trade
Stocks sold off in earnest on Wednesday, with virtually all sectors experiencing profit-taking from the recently overbought condition of the markets.
I have tried to have it both ways of late. On the one hand, as I’ve noted here over the past few weeks, there has been a surge in stocks with the lowest possible Short Term PowerRatings of 1. This has been one of the trademarks of overbought markets that were likely to pull back or correct lower in the near term.
Combined with some of our favorite indicators, like the 2-period RSI, and the dramatic upgrades to the PowerRatings of short or inverse ETFs, we should not have been surprised to see stocks sell-off as they did.
On the other hand, there have been a number of stocks with improving Short Term PowerRatings, ratings of 8 or 9, that have increasingly populated our Top 25 PowerRatings Stocks list over the past day or two. This let us know that, amidst the generally overbought conditions of the markets, there are a growing number of stocks that had already pulled back and may be among the first to respond when buyers return to the market – after the correction we should have increasingly understood to be likely.
Of the stocks noted at the beginning of the week in my 5 PowerRatings Stocks for the Next 5 Days column, I note that both the bond fund, the iShares Lehman Brothers 20+ Year Treasury Bond ETF, TLT
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PowerRating) and the CurrencyShares Japanese Yen Trust ETF, FXY
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PowerRating) have advanced over the past two days, rallying from oversold lows. Allegiant Travel Company
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PowerRating) has moved sideways while both Quality Systems
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PowerRating) and Royal Gold
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PowerRating) continue to pull back – QSII to the point of earning a Short Term PowerRatings upgrade from 8 to 9.
For today, I’ll add three stocks that have moved lower in recent days and earned Short Term PowerRatings of 8 in the process. Those who took advantage of the notes in yesterday’s column "Bought and Overbought: PowerRatings Point to Inverse Opportunities" should in most cases be wary of overstaying your welcome.
CH Energy Group
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PowerRating) Short Term PowerRating 8. RSI(2): 10.57
HCC Insurance Holdings
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PowerRating) Short Term PowerRating 8. RSI(2): 5.30
Nippon Telegraph and Telephone ADRS
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PowerRating) Short Term PowerRating 8. RSI(2): 2.18
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