PowerRatings: Trading Recession Stocks and Short ETFs

As the markets continue to ramp higher, we are seeing fewer stocks earning PowerRatings of 9 or 10. Even the number of 8-rated stocks is only slightly more than half of our Top 25 PowerRatings stocks, an anecdotal reflection that is worth keeping in mind when surveying the current climate for trading opportunities.

Half of the game in trading PowerRatings stocks successfully is in knowing when to trade and when not to trade. While there is a tendency for traders to want to be trading almost constantly, actually making money as a trader has more to do with picking those instances when the edges are greatest on your side. One famous trader suggested years ago that this was the fundamental difference between speculation or trading on the one hand, and mere gambling on the other.

We can see, for example, that the ETFs that represent the major indexes — the S&P 500’s SPDR Trust
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, the Nasdaq 100’s PowerShares QQQ Trust
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, and the Dow industrials’ Diamonds
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— all have low Short Term PowerRatings. Again this suggests that the major markets are overbought and that those looking to get long stocks in general are better off waiting for those PowerRatings to rise — and those prices to retreat.

All of this points to a market with relatively few opportunities for traders looking to buy on pullback. Those opportunities that do exist are in the few leveraged short ETFs that are not yet trading below their 200-day moving averages, as well as a few stocks with exposure to the cash-strapped end of the economy. They, along with a gold stock, will represent our stock and ETF offerings for today.

Family Dollar Stores
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Short Term PowerRating 9. RSI(2): 5.50

ProShares UltraShort Consumer Goods ETF
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Short Term PowerRating 8. RSI(2): 10.60

ProShares UltraShort Industrials ETF
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Short Term PowerRating 8. RSI(2): 7.57

Dollar Tree Inc.
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Short Term PowerRating 8. RSI(2): 7.40

AngloGold Ashanti Ltd.
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Short Term PowerRating 8. RSI(2): 8.06

Recall that stocks with PowerRatings of 8 have outperformed the average stock by a margin of more than 8 to 1 after five days according to our historic testing.

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!