PowerRatings Chartology: 3 Stocks for Swing Traders
Stocks are reversing yesterday’s gains in the first hour of trading on Thursday.
The pre-market futures were pointing to a near rout, but as the opening bell sounded, traders bid shares higher, off the pre-market lows, though not enough to bring stocks into the green early.
As I mentioned in this morning’s TradingMarkets Battle Plan, the market technically speaking is neither extremely overbought nor extremely oversold. The markets were bullish enough yesterday to relieve the growing overbought conditions, but they were not so bullish as to pull the markets into overbought territory. Hence, neutral.
That said, we found a surprisingly high number of 10-rated stocks after yesterday’s close. This, in contrast, suggests that swing traders can and should move toward a posture of looking for quality pullbacks in stocks trading above their 200-day moving averages. Low 2-period RSIs, consecutive down days and sharp sudden declines of 10% or more are some of the indicators that we like to see when choosing from among the various top rated opportunities.
Mastec Inc.
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MTZ |
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PowerRating) Short Term PowerRating 9. RSI(2): 22.04
The PowerRatings chart of Mastec Inc. above reminds us of some of the opportunities to be found in stocks with high Short Term PowerRatings. Note how low Short Term PowerRatings in mid-June led to a pullback and high Short Term PowerRatings by month’s end. And within five days of the first PowerRating upgrade to 8 or higher, MTZ rallied from just over $12 to just over $14.
NetScout Systems Inc.
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NTCT |
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PowerRating) Short Term PowerRating 9. RSI(2): 20.34
We can see again how low Short Term PowerRatings help us anticipate pullbacks in the PowerRatings chart of NetScout Systems Inc.
The interesting pullback here comes just as the stock climbed above its 200-day moving average. The low Short Term PowerRatings signaled that the stock was overextended in the short term. And shortly thereafter, the stock pulled back to that 200-day level. This pullback earned NTCT a significant PowerRating upgrade from 3 to 6 to 8. Five days after earning that PowerRating upgrade to 8, NTCT had advanced from just over $11 to just over $16.
Vnus Medical Technologies Inc.
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VNUS |
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PowerRating) Short Term PowerRating 9. RSI(2): 2.60
The last stock we’ll look at is Vnus Medical Technologies. In this case, while the low Short Term PowerRatings provided a signal that a short term top was due, it took several days for the stock to actually pull back significantly enough to earn the sort of high Short Term PowerRatings that mark a stock as a good trading candidate to the long side. In this case, the low Short Term PowerRatings appeared in early July, the pullback and PowerRatings upgrades came very late in the month, and the gains – similarly slow to arrive – materialized in over the course of the first half of August.
All three stocks in today’s report have Short Term PowerRatings of 9. Our research into short term stock price behavior indicates that stocks with Short Term PowerRatings of 9 have outperformed the average stock by a margin of more than 13 to 1 after five days.
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.
David Penn is Editor-in-Chief at TradingMarkets.com.