I wonder if there is anything more gratifying to a short-term stock trader than buying a
stock on intraday weakness, and having that stock upgraded to a top, 10 out of 10, rating
by the end of the trading day.
That may describe how traders felt as shares of Gravity Co. (NASDAQ: GRVY) pulled back again last Tuesday. The stock had begun selling off in earnest the
previous Friday, closing lower for three out of four trading days. Another lower close
on Monday earned the stock a ratings upgrade to a “consider buying” 8 out of 10. But it
was not until the Tuesday upgrade, which gave shares of Gravity Co. a short-term rating
of 9 out of 10, when the stock truly became among the more attractive potential targets
on the radar of high probability traders.
Looking to buy any weakness on the day after GRVY earned its 9 out of 10 rating, traders
and active investors were rewarded with additional selling. And, as hinted at above,
this selling was strong enough to not only result in a signifcantly lower close, but also
a ratings upgrade to our highest level of 10 out of 10.
This is the definition of a high probability trading situtation. The stock has pulled
back for multiple days in a row. The stock has been trading in technically oversold territory
twice above the 200-day moving average. The stock has been upgraded from an 8 out of 10
to a 9 out of 10, and from a 9 out of 10 to a 10 out of 10.
Traders who took advantage of these repeated bullish signals were able to pick up shares of
Gravity Co near the lowest levels of the stock’s multi-day retreat. For example, an
intraday entry level near $2.50 intraday on Tuesday (3% below the close on Monday), would
have resulted in a three-day trade and a gain of 6% as the stock rallied into strength on
Friday, closing above its 5-day moving average.
This week’s honorable mention Stock of the Week goes to another software company,
Guidance Software (NASDAQ: GUID). Shares of GUID earned ratings of 8 out of 10 on the
12th, and were upgraded to a “consider buying” 9 out of 10 just one day later. Traders who
bought GUID the following day – using the exact same intraday entry strategy as with
Gravity Company above – were able to take positions near the lows of the fourth and final
day of the pullback, and to realize gains of more than three and a half percent just two
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