PowerRatings, Profit-Taking and the Next Big Trade
Stocks were little changed on Wednesday following the dramatic sell-off the day before.
What is the next move for short term stock and ETF traders who use PowerRatings to help spot overbought and oversold opportunities in the market? In the wake of a timely observation on the overbought nature of the market and the suitability of short ETFs for short term trades (see any one of my columns over the past week), we are now in at a moment where patience will likely pay bigger dividends for short term traders than pressing forward aggressively.
So if you have gains in any of the short ETFs that have been discussed over the past several days, consider taking profits — at least partial profits — in those positions. Right now, our goal is to wait and watch for the next round of opportunities. Should the markets continue to move lower, then we will see a greater number of stocks above their 200-day moving averages pulling back. These stocks will be among our primary targets for trades to the upside.
We will also keep an eye on the markets themselves through proxies like the S&P 500 SPDRS
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PowerRating), the PowerShares QQQ Trust
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PowerRating) and the Dow Diamonds
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PowerRating) among others. When the Short Term PowerRatings of the SPY, QQQQ and DIA earn upgrades to 8 or higher, we will now that the markets themselves are becoming cheap. This is an additional signal that opportunities to buy have increased.
Of course, if the markets rally strongly again, becoming overbought below the 200-day moving average, we will return to the approach that has proven so successful over the past several weeks and months: spotting and trading high Short Term PowerRatings short ETFs with the lowest 2-period RSIs.
Netflix Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 10.33
Haemonetics Corporation
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PowerRating) Short Term PowerRating 9. RSI(2): 6.88
SXC Health Solutions Corporation
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PowerRating) Short Term PowerRating 8. RSI(2): 19.27
NVE Corporation
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PowerRating) Short Term PowerRating 8. RSI(2): 6.87
Lincoln Educational Services
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PowerRating) Short Term PowerRating 8. RSI(2): 3.85
For now, here are a few stocks that have Short Term PowerRatings of 8 or higher and remain in pullback mode from the recent sell-off. Should buyers return in the near term, these are among the stocks that are statistically more likely than the average stock to reach higher levels.
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!
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