PowerRatings, Swing Trading and the Retest
Stocks sold off on Friday as Thursday’s strong rally created modestly overbought conditions in the Dow, S&P 500 and Nasdaq.
By now it has almost become a Pavlovian reaction. Sell the rallies. And as the psychology shifts, the conventional wisdom takes hold of the fact that selling strength has been a winning trading strategy for more than a year now.
The trade may continue to pay off. We are certainly looking at rallies with a skeptical eye. As long as the Dow, S&P 500 and Nasdaq remain below their 200-day moving averages, the edge is remaining skeptical where rallies are concerned.
Fortunately, none of this changes our approach when it comes to Short Term PowerRatings, when we see high Short Term PowerRatings — in stocks or in inverse exchange-traded funds — we know we are looking at equities or ETFs with a statistical likelihood of outperforming the average stock or fund in the short term.
The market is still providing precious few of these opportunities. We are also still in a strong-get-stronger momentum market, which stocks are behaving more or less as they should. As we start to get mismatches — strong stocks (and short ETFs) moving lower and weak stocks (and long ETFs) moving higher — we will see an increase in the amount of swing trading opportunities for us to take advantage of.
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.