PowerRatings Stock Strategies: Pullbacks in an Advancing Market
First, an update: it looks like all three stocks mentioned in yesterday’s PowerRatings report (“PowerRatings Stock Strategies: After the Bounce”) advanced on Thursday, with one — PF Chang China Bistro
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PowerRating) not only rallied above its 5-day moving average, but also closed higher by more than 3%.
This is the kind of powerful reaction short term traders can have to high PowerRatings stocks. For professional traders, value is nearly everything when it comes to buying and trading stocks. And a high PowerRating stock, typically a stock trading above its 200-day moving average that has pulled back significantly over the past few days, is as good an example of short term value in the marketplace as any we’ve been able to uncover in our research.
Recall that the highest PowerRating stocks — those with ratings of 9 or 10 have been among the best stocks for short term traders to trade. 10-rated stocks — those stocks that have received our highest rating — have actually bested the average stock by whopping 14 to 1 margin over five day. 9-rated stocks, by comparison, have fared very well in their own right, outperforming the average stock by a margin of more than 9 to 1 over the same, short term time frame.
For more tips on how to trade PowerRatings stocks, read Larry Connors’ strategy primer: How to Find the Best Stocks to Trade Every Day.
With stocks moving higher over the past few days, the number of quality pullbacks and high PowerRatings stocks is significantly fewer than before. However, there are a few names that traders have not yet discovered that may be worth watching in the event that profit-taking replaces buying in the near term.
Atlas Air Worldwide Holding
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PowerRating) closed lower for five days in a row leading into Thursday’s relatively flat session (see above). This has resulted in a very oversold market for the stock, which has yielded an extremely low 2-period RSI of less than 1 for the past three days. AAWW has a PowerRating of 9.
Although closing higher for each of the past four sessions, Sony
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PowerRating) remains sufficiently under the sway of sellers to keep the stock from bouncing significantly as the rest of the market rallies. SNE’s 2-period RSI is back around 13 after falling to as low as 3 earlier in the week. SNE has a PowerRating of 8
Last but not least, Sears Holding
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PowerRating) is seeing some selling early on Friday that may help traders determine whether or not an opportunity to trade the stock is materializing. With a PowerRating of 8, SHLD gapped down by nearly 12% on Thursday — a clear sign of a very oversold market.
Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of more than 14 to 1 after five days. Click here to start your free, 7-day trial to our Short Term PowerRatings!
David Penn is Editor in Chief at TradingMarkets.com.