Pullbacks and PowerRatings: 5 Stocks for Swing Traders
Stocks finished the day around breakeven in a session characterized by the mass hypnosis of the Bernanke/Paulson testimony before Congress on Wednesday.
The S&P 500 and Dow industrials are down for the third session in a row, with the Nasdaq down for four consecutive sessions. This means that generally speaking we are seeing stocks that are more oversold than overbought — and by a significant degree. The S&P 500, for example, has a 2-period RSI of less than 30 (it is actually the second day in a row that the S&P 500 has had a 2-period RSI of less than 30). The Nasdaq Composite, for its part, has a 2-period RSI of just above 31.
Another way we can tell that stocks are making the sort of quality pullbacks that swing traders who buy weakness and sell into strength live for is by comparing the number of 9 or 10 rated stocks to the number of 8-rated stocks. Although the edge is not overwhelming, we know that when the number of 9-rated stocks begins to rise relative to the number of 8-rated stocks, we are looking at a market that is becoming more attractive to swing traders.
This is to take nothing away from the 8-rated stock. After all, our research into short term stock price behavior since 1995 indicates that stocks with Short Term PowerRatings of 8 have outperformed the average stock by a margin of more than 8 to1 after five days. When purchased on intraday weakness — a few percentage points below the close of the day when the stock earned its 8 PowerRating — 8-rated stocks can provide traders with excellent upside.
However, there are caveats when trading 8-rated stocks. For example, it is more important with 8-rated stocks than other high Short Term PowerRatings stocks to make sure they are trading above their 200-day moving averages. It is also important that 8-rated stocks be as oversold as possible before being purchased for long trades. Here, we look for the lowest possible 2-period RSI values as our guide.
USA Mobility Inc.
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USMO |
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PowerRating) Short Term PowerRating 9. RSI(2): 1.46
Conns Inc.
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CONN |
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PowerRating) Short Term PowerRating 9. RSI(2): 4.06
TCF Financial
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TCB |
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PowerRating) Short Term PowerRating 8. RSI(2): 33.43
Zenith National Insurance Company
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ZNT |
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PowerRating) Short Term PowerRating 8. RSI(2): 10.84
Werner Enterprises Inc.
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WERN |
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PowerRating) Short Term PowerRating 8. RSI(2): 8.32
Over the past few days, the number of high Short Term PowerRatings stocks has increased, which means that traders should be accumulating those stocks that are trading above their 200-day moving averages, and making significant pullbacks in the past few days. If you have difficulty finding stocks that have these characteristics, then the five Short Term PowerRatings stocks in today’s report are a great place to start.
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.