Stock Trading with PowerRatings: Quantified Strategies for Trading Top-Rated Stocks (FDML, NVMI, DXPE)
The rally on Tuesday gives us another opportunity to show how a trading strategy called “intraday weakness” is a key part of high probability stock trading. For stock traders using Stock
PowerRatings, trading with intraday weakness can both potentially increase gains as well as your per trade win rate/accuracy rate.
Larry Connors discusses the principle of intraday weakness in his classic article, “How to Find the Best Stocks to Trade Every Day.”
We’ve also covered the topic in a series of articles
called “Intraday Weakness and Scaling-In: Two Greatest Secrets of High Probability Trading”.
To read “How to Find the Best Stocks to Trade Every Day,” click
here.
To read “Intraday Weakness and Scaling-In: Two Greatest Secrets of High Probability Trading,” click
here.
For now, understand that intraday weakness means waiting for a stock to earn Stock PowerRatings of 9 or 10, and then using a limit order anywhere from 2% (aggressive) to 6% (conservative)
below that session’s closing price to take a position in the following stock if it pulls back even further.
We all know by now that buying stocks after they have pulled back historically has outperformed buying stocks after they have made new short term highs. Trading strategies like intraday
weakness take this insight even further, looking for those stocks that have reached truly extreme levels. These are levels from which, based on our research, top-rated stocks have tended to
make significant short-term gains.
Let’s take a look at some recent winners through mid-week.
In each of these examples, I used an intraday weakness of 3% and the exit of a close above the 5-day moving average. This is a basic entry/exit trading strategy for trading stocks with Stock PowerRatings, although both more aggressive and more conservative variations are possible.
^FDML^
Shares of FDML were upgraded to Stock PowerRatings of 9 on August 12th. This was the first signal that the stock had retreated to levels from which it has historically made significant short term gains.
A 3% intraday weakness entry in FDML would have allowed traders to get long the stock intraday on August 13th. Two days later, Federal Mogul Corporation closed higher by more than 8%.
^NVMI^
Another gainer from Tuesday’s rally was Nova Measuring Instruments.
This stock was upgraded to a 9 on August 13th.
Here again, an intraday weakness limit order of 3% was enough for traders to be long NVMI ahead of the stock’s big move on Tuesday.
^DXPE^
Last but not least is another big gainer of more than 8%. This time, the stock – DXP Enterprises – earned its Stock PowerRatings upgrade to 9 on August 11. Note that seven days earlier,
DXPE had our lowest Stock PowerRatings of 1.
Traders were able to get long in DXPE one day later, intraday, as the stock pulled back for another trading session. Two days later, DXPE closed above its 5-day moving average (the exit
signal) for a gain of well over 8%.
Find out what Stock PowerRatings can do for you and your trading. Click
here to launch your free, 7-day trial to our Stock PowerRatings today.
David Penn is Editor in Chief at TradingMarkets.com.