PowerRatings Trading Strategies: Waiting for the Upgrades
Oversold conditions have become only more oversold in the first hour of trading on Friday, though stocks have rallied from their lowest levels – levels that included the S&P 500’s intraday penetration of the November 2008 lows.
Going into Friday’s trading, the ETFs representing the major markets – the S&P 500, the Dow industrials and the Nasdaq 100 – all had neutral Short Term PowerRatings of 5. (I’m referring to the
(
SPY |
Quote |
Chart |
News |
PowerRating), the
(
DIA |
Quote |
Chart |
News |
PowerRating) and the
(
QQQQ |
Quote |
Chart |
News |
PowerRating), respectively. This meant, as I suggested to readers late yesterday in my “5 PowerRatings Stocks for the Next 5 Days” column, that patience would be the most important trading strategy for short term traders right now.
CH Energy Group
(
CHG |
Quote |
Chart |
News |
PowerRating) Short Term PowerRating 9. RSI(2): 13.15
Why? As high probability traders using high probability trading strategies, having the patience to wait for the opportunities that have the best edges is key. We know that the more extremely oversold a market becomes, the more likely that market is to rally powerfully when its pullback has run its course. We know from our study of short term stock price behavior since 1995 that when stocks become extremely overbought, it is only a matter of time before profit-taking will develop, sending the stock (or ETF) plunging lower.
Telecommunications Systems Inc.
(
TSYS |
Quote |
Chart |
News |
PowerRating) Short Term PowerRating 8. RSI(2): 11.37
These are the two circumstances we look for every day – the two kinds of trading opportunities that our Short Term PowerRatings make easy to spot and trade.
With stocks selling off early on Friday – though not as aggressively an hour into trading as they were shortly after the open, our focus turns toward opportunities to buy oversold stocks that have high Short Term PowerRatings and are still trading above their 200-day moving averages. In addition to our 9-rated stocks – stocks that have statistically outperformed the average stock by a margin of more than 13 to 1 after five days according to our research – short term traders may want to watch some of the 8-rated stocks as well to see how they trade on Friday. Should the selling continue, then some of the 8-rated stocks are likely to get Short Term PowerRatings upgrades to 9 or even higher, making them potentially even more attractive as opportunities to the long side.
Scots Miracle Gro
(
SMG |
Quote |
Chart |
News |
PowerRating) Short Term PowerRating 8. RSI(2): 12.11
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.
| Click here to start your free, 7-day trial to our Short Term PowerRatings! |
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.
David Penn is Editor in Chief at TradingMarkets.com.