Stock Market Approaching Oversold Extreme
PowerRatings can be used to find trading opportunities. Heading into today’s trading, there are few trade signals. On the long side, there are no stocks priced at $5 or more with a PowerRatings of 10. Only five stocks priced above $5 have a PowerRatings of 9. No ETFs or leveraged ETFs have PowerRatings above 8. The table below shows that ETFs and leveraged on major stock market indexes are neutral. This table includes SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA), PowerShares QQQ (NASDAQ: QQQ) and leveraged funds that track the indexes along with inverse leveraged funds on each index.
PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.
There are also few signals on the short side. Only 12 of the stocks in the NASDAQ 100 index having a PowerRatings of 3 or less and only 28 of the stocks in the S&P 500 have a PowerRating below 3. With just 5.6% of the stocks in the large cap index oversold, and 12% of the more volatile stocks in the NASDAQ 100 index oversold, traders might want to consider waiting for the market to move to either a bullish or bearish extreme before adding positions.
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All data is as of the end of day on 12/30/2013.