PowerRatings Review: Waiting for Weakness, Bracing for Strength
Looking back at the stocks noted in my last column, 5 PowerRatings Stocks for the Next 5 Days, we see one instance in which a stock has closed above its 5-day moving average, signaling to us the sort of strength we like to see when exiting a position. This is what we have in the performance of Cougar Biotechnology
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Also up on Tuesday was Alon USA Energy Inc.
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PowerRating), which gained nearly 4%. ALJ did not close above its 5-day moving average on Tuesday, despite the surge higher. But traders could be forgiven for taking at least partial profits in such a winning trade in such a short time.
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This leaves us with three other stocks, all of which showed strength on Monday only to find themselves back under the pressure of profit-taking come Tuesday.
These stocks include Family Dollar Stores Inc.
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PowerRating).
Going forward, it looks like we have a market that is more prepared to advance than retreat. Stocks opened lower on Tuesday and closed higher, a generally bullish signal that buyers are eager to buy pullbacks.
And when those pullbacks develop in stocks with PowerRatings of 8, 9 or 10 then we shall be no less eager to consider them for short term trades to the upside. After all, our research indicates that when high Short Term PowerRatings stocks are bought on pullbacks, typically on intraday pullbacks of 3% or more, they significantly outperform the average stock in the short term. This high probability approach to short term trading of stocks is a dramatic departure from the world of breakout trading, and offers short term traders a new strategy to trade and potentially profit using high PowerRatings stocks
In addition to the three stocks still on our radar (noted above), here are two others that have PowerRatings of 8 and may be interesting opportunities should sellers show up to take profits intraday on Wednesday.
Terra Nitrogen Company LP
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PowerRating) Short Term PowerRatings 9. RSI(2): 0.415
SXC Health Solutions Corporation
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PowerRating) Short Term PowerRatings 8. RSI(2): 3.19
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