Stock of the Week: American Public Education
A four-day sell-off. A 3% intraday entry. A two-day rally of more than 4%.
That’s how many short-term traders will remember American Public Education (NASDAQ: APEI), one of the higher rated stocks in our database last week and our Stock of the Week for this week.
Shares of APEI began pulling back from a recent short-term high in mid-January. What is interesting about the stock is that it went from having our lowest “consider avoiding” rating of 1 out of 10 to having a “consider buying” rating of 8 out 10 in just two days. Follow-through selling a day later took APEI even lower, earning the stock an additional ratings upgrade to 9 out of 10.
The higher a stock’s rating, the greater the short-term, historical edge. And using the ratings to help guide trading decisions is in part a balance between having more trading opportunities with somewhat smaller edges and having fewer trading opportunities with somewhat larger edges.
Here, waiting for APEI to earn a 9 out of 10 rating and then looking to take a position in the stock on any follow-through selling provided an excellent opportunity for short-term traders looking to buy weakness in bull market territory.
An intraday entry of 3% would have allowed short-term traders to have taken a position in APEI the day after it earned a ratings upgrade to 9 – and near the lows of the session, at that. And as the chart shows, additional buyers were not far behind, sending APEI higher over the next two days for a gain of more than 4%.
The gains in APEI are a reminder that trading using intraday entries can be a powerful tool in helping traders make the most out of stocks that have pulled back to levels where, historically speaking, they have tended to reverse and head higher. And for traders who find intraday entry strategies too limiting, know that you can always combine stocks with more moderate ratings of 7 and 8 with deeper, more discriminating intraday entry levels (such as 5% or 7%) to increase the number of potential trading candidates on any given day.
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David Penn is Editor in Chief of TradingMarkets.com