Stock Market Still Oversold Despite One-Day Rally
Major stock market averages rallied yesterday but ended the day oversold according to PowerRatings. SPDR Dow Jones Industrial Average (NYSE: DIA) gained 0.58% yesterday and ProShares UltraPro Dow30 (NYSE: UDOW) was up 1.54%. Both start trading today with a PowerRatings of 9. SPDR S&P 500 (NYSE: SPY) was up 0.60% but is still oversold with a PowerRatings of 8.
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.
In the past, buying stocks with a rating of 8 on a 3% pullback the next day and selling five days later has been profitable 71% of the time. The average winner has gained 3.1%. Other entries and exits also show high winning percentages and large average gains.
ProShares Ultra S&P500 (NYSE: SSO) is also oversold with a PowerRatings of 8 and could also provide a trading opportunity.
All data is as of the end of day on 1/28/2014.