PowerRatings Chartlogy: 3 Top Stocks for Traders
Stocks were taking a breather in the first few hours of trading on Friday following yesterday’s sharp, financials-led sell-off.
The markets are in decidedly neutral territory. This makes sense given the rollercoaster ride stocks have been on for the past week. Recall that stocks bottomed early last week, rallied into the beginning of this week, and then yesterday experienced a pullback that retraced the previous two days’ worth of gains.
It is market volatility like this that makes a trader grateful for a straightforward trading system based on buying weakness and selling strength. In the days leading up to yesterday’s sell-off, we warned traders that the markets were becoming increasingly overbought and that traders should either consider short-term short selling opportunities OR stand aside and wait for the market to come in a bit and create a new set of trading opportunities to the upside.
This is increasingly the position we are finding ourselves in, as lower prices in stocks are creating trading candidates with increasingly high Short Term PowerRatings. Here are three such candidates as of Thursday’s close.
Cimarex Energy Company
(
XEC |
Quote |
Chart |
News |
PowerRating) Short Term PowerRating 9. RSI(2): 8.39
Cimarex Energy Company has been pulling back for more than a month. The stock’s peak in mid-June was actually anticipated by a downgrade in the stock’s Short Term PowerRating to a “consider avoiding” 3.
Traders can bet against stocks that have low Short Term PowerRatings when those stocks are trading above their 200-day moving averages. But I have suggested that such situations may often be more effective in alerting traders to the likelihood of a pullback in the near term than as short sell signals, per se.
Gerdau Ameristeel Corporation
(
GNA |
Quote |
Chart |
News |
PowerRating) Short Term PowerRating 9. RSI(2): 3.18
While the low Short Term PowerRatings in GNA provided a less acute warning than they did for Cimarex Energy, the “3” rating in GNA did help warn traders that the stock was increasingly overextended to the upside.
What is really compelling in the chart of GNA is the short term bounce the stock enjoyed the last time its Short Term PowerRating rallied to 9. That day, the stock closed at 16.57. Five days later, GNA closed at 17.49 for a gain of more than 5%.
Foundation Coal Holdings
(
FCL |
Quote |
Chart |
News |
PowerRating) Short Term PowerRating 9. RSI(2): 8.19
Last, let’s take a look at FCL – Foundation Coal Holdings. Like the other two stocks in today’s report, FCL has a Short Term PowerRating of 9.
The PowerRatings chart of FCL provides examples of both low Short Term PowerRating warnings and high Short Term PowerRating opportunities to the upside. The PowerRatings downgrades to 1 that the stock received in late June did an excellent job of anticipating the pullback that occurred early in July. And that pullback helped create a significantly oversold condition in FCL – a condition that led to a tradable bounce when FCL earned a Short Term PowerRating upgrade to 9 on July 7.
Closing that day at 74.80, Foundation Coal Holdings closed at 79.11 five days later for a gain of 5.76%.
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.
| Click here to start your free, 7-day trial to our Short Term PowerRatings! |
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.