To say that there have not been many opportunities for short-term traders to buy weakness and sell strength effectively in this market is an understatement. With the broader market overbought, led by sectors like the financials and technology, the only stocks that have been pulling back consistently above the 200-day moving average have been utilities and consumer defensive stocks, many of which have yet to rally back into strength.
So the upgrade to a 9 out of 10 rating in shares of drilling and exploration company Helmerich & Payne (NYSE: HP) must have been a sight for sore, swing trading eyes. Shares of the energy company had just finished lower for a third day in a row as traders took profits from the stock’s recent rally to their highest levels since August 2011.
With the stock earning a 9 rating, there was little doubt that HP had pulled back to levels where buyers previously had been lured off the sidelines – even in the short-term. And for traders who used intraday entry strategies to take positions in HP as it traded even lower the day after it earned its upgrade to 9 out of 10, the rewards as the stock snapped back significantly the very next day were significant.
One of the positive aspects of quantified trading is that traders can tell instantly whether or not there is a potential edge in any market. While some traders or investors may be biased by their bullish or bearish outlook, traders who rely solely on the data are able to spot good, potential buying opportunities from poor ones, regardless of what the broader market is doing.
The pullback in HP was one of very few that traders looking to buy weakness and sell strength were able to take advantage of in the current market. But traders should not be surprised if many of the high-flying stocks today are filling the ranks of top-rated stocks tomorrow, as gains are locked in and profits taken from what have been some very impressive moves in many instances in many different markets.
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David Penn is Editor in Chief of TradingMarkets.com