PowerRatings Chartology
Stocks were up from their premarket lows, though the Dow, Nasdaq and S&P 500 remain in the red after the first hour of trading.
Since it’s Friday, it’s time for PowerRatings Chartology. Here I want to show (or remind) readers how helpful our PowerRatings charts can be for short term swing traders. While there are some basic ways to use our PowerRatings charts, such as looking to see which charts display stocks with Short Term PowerRatings of 8, 9 or 10, there are other ways that PowerRatings charts can be used that can be even more helpful for traders looking to anticipate opportunities to buy stocks on weakness.
Our first PowerRating chart, of Nara Bancorp Inc.
(
NARA |
Quote |
Chart |
News |
PowerRating), with its Short Term PowerRating of 9, provides an example of one of the ways that I find our Short Term PowerRatings charts most useful.
What is interesting in the NARA chart is how low Short Term PowerRatings anticipated first the pullback below the 200-day moving average this summer just after the stock rallied above that level. Pullbacks such as this are common when stocks rally above the 200-day moving average for the first time. What the low Short Term PowerRatings do is help anticipate when these pullbacks are statistically more likely to occur.
We also saw another instance of low Short Term PowerRatings providing a warning of a pullback early in the second half of August. Within three days of NARA’s spike higher and PowerRating downgrade to 3 on September 19th, the stock had not only fallen from over $17 to under $14, but had also earned a Short Term PowerRating upgrade to 8.
More traditional uses of our Short Term PowerRatings charts can be seen through this example in the PowerRatings chart of Wet Seal Inc.
(
WTSLA |
Quote |
Chart |
News |
PowerRating). Note how high Short Term PowerRatings early in the second half of August anticipated a rally that saw WTSLA climb by more than 28% from August 21st to September 8th.
The current pullback has WTSLA correcting all the way to its 200-day moving average, where the stock appears to have encountered some buying interest. The combination of the stock’s high Short Term PowerRating and its oversold status make Wet Seal a stock worth watching in the near term should further intraday weakness — such as we are seeing here on Friday — provide an opportunity for a low-cost entry.
Last, I want to take a quick look at Zale Corporation
(
ZLC |
Quote |
Chart |
News |
PowerRating).
More than the instance of WTSLA, the PowerRatings chart of ZLC provides a plethora of examples of high Short Term PowerRatings anticipating moves higher. We can see this happen in ZLC in the second half of July, where Zale Corporation earned a Short Term PowerRating upgrade to 8 and, within seven days, had gained more than 24%. The first half of August saw a similarly powerful move from ZLC after a PowerRating upgrade to 8. In this instance, the stock earned a Short Term PowerRating of 8 on September 11, 2008 with a close of 26.99. Six days later, ZLC closed at 30.89 for a more than 14% gain.
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 Editor in Chief at TradingMarkets.com.