Stock PowerRatings: 3 Strategies for Short Term Traders
Everyday stocks keep going higher. The governmental stimulus combined with surprisingly strong third quarter earnings reports supercharged the bull market. Psychological and technical resistance at the 10,000 level for the Dow Jones Industrial Average was shattered like a baseball breaking a suburban kitchen window.
Every news story is spun in a bullish positive manner no matter how rotten the underlying facts remain. Will this Market continue to reach for the moon without any dramatic corrections? Is this merely a case of irrational exuberance with the day of reckoning getting closer every trading session?
Well, the truth is, there will be a dramatic correction sooner or later. It’s simply the way markets work. The question is how high can the market climb before a correction takes place? Remember, stocks can remain irrational longer than most players can remain solvent. This market can easily take out the all time highs, and it can just as easily test the recent lows. No one really knows for sure what the future holds.
However, there are proven tactics that short-term traders can use to make certain that the odds are on their side when it comes to picking stocks for short-term gains. These bull tools will keep you on top of the trading game. This particular system is an easy 3 part method that firmly places the odds of short-term success firmly in your court.
The first part is the stock needs to trade above its 200-day simple moving average to be considered. This assures that shares are not in a death spiral into the abyss where few stocks ever return.
The Second part is to look at stocks whose 2-period relative strength index (RSI(2)) is less than 2. Most traders use the standard 14 period RSI but our studies discovered that there was no edge at this setting of the indicator. While RSI(2) has proven to produce significant edge to the short term trader. (For additional information on this proven indicator click here).
The third and final part is to look only at stocks for short-term gains that have an 8 or above Stock PowerRatings.
The stocks that fulfill each of the above caveats have proven in extensive, statistically valid studies to possess solid odds of increasing in value over the 1 day, 2 day and 1 week time frame.
Here are 3 bull tool names that will keep you on top of the short-term trading game.
Columbia Banking System
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Wimm Bill Dann Foods
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WBD |
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MYR Group
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MYRG |
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Learn more strategies for trading stocks in the short-term with a free trial to our PowerRatings! The highest rated stocks have outperformed the average stock by a margin of more than 14 to 1 after five days! Click here to launch your free PowerRatings trial today!
David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.