PowerRatings Chartology: 3 Stocks for Swing Traders
Stocks continue to move lower in the first hour of trading on the final trading day of the week.
I have been urging patience for the past week, suggesting to traders that our indicators as well as the patterns I’ve been seeing in our Top 25 PowerRatings Stocks roster each day were indicating that stocks in general needed to move lower before we would start to see the sort of high quality pull backs that are at the core of our trading strategy.
With yesterday’s aggressive selling, the number of high Short Term PowerRatings stocks has increased greatly, providing a wealth of opportunities for swing traders looking to take advantage of lower prices for stocks.
In today’s report, I wanted to highlight and remind readers of how our Short Term PowerRatings look in action – particularly the way that high Short Term PowerRatings can help traders anticipate potential bottoms and turning points in declining stocks.
Casey’s General Stores Inc.
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CASY |
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PowerRating) Short Term PowerRating 9. RSI(2): 5.41
In the case of CASY, we see an instance when a stock earns a high Short Term PowerRating while in the middle of a consolidation.
Many times we think of high Short Term PowerRatings developing after a stock makes a major decline. But as overbought conditions wane during a consolidation – particularly a consolidation after a significant rally – it is not uncommon for oversold conditions to appear. These short term oversold conditions emerged in CASY on August 21st, as the stock earned a Short Term PowerRating of 8. Within five days, the stock was up 3%.
Englobal Corporation
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ENG |
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PowerRating) Short Term PowerRating 9. RSI(2): 1.58
An even more dramatic pullback and PowerRatings upgrade can be found in Englobal Corporation as the stock retraced to its 200-day moving average early in August.
Shares of ENG broke down from a short term consolidation to pull back to its 200-day moving average. In doing so, the stock’s Short Term PowerRatings climbed from the 4s and 5s to the 7s and 8s. In fact, for four out of the six days ENG spent pulling back to its 200-day moving average, the stock had a Short Term PowerRating of 8.
This pullback – and the 8-ratings – helped traders anticipate a major turnaround in the stock, which began on the sixth day after the stock first developed a Short Term PowerRating of 8. The stock soared over the course of August, rallying from just under $12 to just shy of $18 by month’s end.
The last stock I want to take a look at is Raven Industries Inc.
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RAVN |
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PowerRating) Short Term PowerRating 9. RSI(2): 9.00.
Of the three stocks in today’s report, Raven Industries Inc. is the one that is moving higher on Friday, making it the least likely to sustain its high Short Term PowerRating in the near term.
In many ways, the PowerRatings chart of RAVN is similar to the chart of CASY. Again, we have a stock that developed its key Short Term PowerRating upgrade during a sideways consolidation, as opposed to at the end of a vertical pullback. And also like CASY, RAVN provided an impressive return in a relatively short period of time. Closing at $40.65 on August 19th with a Short Term PowerRating of 8, RAVN closed at 41.97 within five days – a gain of more than 3%. One day later, RAVN closed at $44.43, a gain of more than three and a half points or 9%.
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David Penn is Editor-in-Chief at TradingMarkets.com.