• Free Book
  • Store
    • Books
    • Free First Chapters
    • Free Newsletters
  • Recent Articles

TradingMarkets.com

Quantified Stock Market Trading Strategies & Systems

  • Home
  • New Trading Research
  • Education
    • Articles
      • Connors Research
      • ETFs
      • Options
      • Stocks
      • Volatility
    • Trading Lessons
    • Connors Research
    • Glossary
    • Interview Archive
    • Videos
  • Python
  • Quantamentals
    • Quantamentals: The Next Great Forefront of Trading and Investing
    • Quantamentals Resources
  • Courses
  • Store
    • New Book! The Alpha Formula
    • “Buy The Fear, Sell The Greed” – Best Seller!
    • Swing Trading College 2019
    • Trading Books and Guidebooks
    • Street Smarts
    • Online Trading Courses
    • Private Mentoring with Larry Connors
    • Customized Trading Research
    • Amibroker Strategy Add On Modules
You are here: Home / Stocks / Commentary / Short Term Trading Strategies That Work: Overbought Yahoo, Oversold O’Reilly

Short Term Trading Strategies That Work: Overbought Yahoo, Oversold O’Reilly

August 12, 2010 by David Penn

Two of the stocks noted in Monday’s “Short Term Trading Strategies That Work” column, 7
Stocks You Need to Know
, provided excellent examples of the high probability approach to short term trading at work.

We noted ^YHOO^ on Monday as one of a number of stocks that had become overbought below the 200-day moving average.
Our research into short term stock price behavior going back more than a decade shows that stocks under their 200-day moving averages tend to underperform stocks trading above their 200-day moving averages.

This edge is at the foundation of our trading philosophy: only buy stocks trading above the 200-day moving average. Avoid or sell short stocks trading below their 200-day moving averages.

YHOO Chart

The reversal to the downside in Yahoo is an example of this principle in action. After becoming overbought below the 200-day moving average, the odds were increasing that the stock would

underperform. From their last overbought close on Monday, shares of Yahoo are down well over 3%.

Also on Monday we spotted an oversold stock, ^ORLY^ trading above its 200-day moving average. For short term traders who had been looking for trades to the long side, the potential for an oversold rally in ORLY likely had the stock on many a high probability trader’s watchlist.

ORLY Chart

After closing lower for six out of the past eight sessions, shares of O’Reilly Automotive were up well over 1% late in trading on Thursday. Short term traders who used intraday weakness to pick up shares of the stock at the lowest possible levels were the biggest beneficiaries of the stock’s oversold reversal to the upside.

A few things are worth remembering here. The first is that having a philosophy of trading can be a critical component in trading consistency and success. Our philosophy of only buying stocks for short term trades when they are trading above their 200-day moving averages and only selling short stocks when they are trading below their 200-day moving averages is what makes it possible for

traders to be trading both on the long side and on the short side at the same time. It’s all a matter of the location of the individual
stock: above the 200-day moving average? Potential buy.

Below the 200-day? Avoid, or potential short sell.

Second, stock trading strategies that use intraday weakness in order to get the lowest possible prices during pullbacks (or the highest possible prices during an overbought bounce) will help short term traders get the most out of their high probability trades. To learn more about how to trade stocks using intraday weakness, click
here to read
:
“Intraday Weakness and Scaling-In: Two Greatest Secrets of High Probability Trading.”)

School’s in session! The Fall 2010 Swing Trading College is a complete training program that provides short term traders with everything they need to know in order to professionally swing trade

the markets. Stocks, exchange-traded funds (ETFs), options, e-minis … The 14-week Swing Trading College led by TradingMarkets CEO and founder Larry Connors is one of the most popular products

offered by TradingMarkets. Click
here to find out why
in a free, online presentation on the
Fall 2010 Swing Trading College.

David Penn is Editor in Chief at TradingMarkets.com.

Filed Under: Commentary, Recent Tagged With: Short Term Traders, short term trading strategies, trading stocks

Buy The Fear, Sell The Greed

Buy The Fear, Sell The Greed

Swing Trading College

New Book From Larry Connors and Chris Cain, CMT – "The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk"

We’re excited to announce the release of a new investment book written by Larry Connors and Chris Cain, CMT. The book, “The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk “ combines… Hedge fund legend Ray Dalio’s brilliant insight into combining uncorrelated strategies… With new, minimally correlated, quantified, systematic strategies to trade… [Read More]

Buy The Alpha Formula Now

Connors Research Traders Journal (Volume 57): 7 Real-World Reasons Why Short Strategies Should Be Included In Your Portfolio

In our new book, The Alpha Formula – High Powered Strategies to Beat the Market with Less Risk, we show the benefits of including short-strategies in your portfolio. As a reminder, building portfolios should be based on First Principles – otherwise known as truths. These truths are: Markets Go Up Market Go Down Markets Go… [Read More]

Company Info

The Connors Group, Inc.
185 Hudson St., Suite 2500
Jersey City, NJ 07311
www.cg3.com

About Us

About
Careers
Contact Us
Link To Us

Company Resources

Help
Privacy Policy
Return Policy
Terms & Conditions

Properties

TradingMarkets
Connors Research

Connect with TradingMarkets

Contact

info@cg3.com
973-494-7311 ext. 628

Free Book

Short Term Trading Strategies That Work

© Copyright 2020 The Connors Group, Inc.

Copyright © 2023 · News Pro Theme on Genesis Framework · WordPress · Log in