Selling on Monday and Tuesday has helped swell the ranks of top-rated stocks going into the second half of the week. Although a sizable number of stocks – including many
stocks with Stock PowerRatings of 8 – have slipped below their 200-day moving averages, there remain a large number of top-rated stocks that both have pulled back significantly AND remained above
their 200-day moving averages.
Let’s take a look at some of the highest (and lowest) rated stocks that short term traders may want to keep an eye on over the next few days.
Shares of BIDU (below) have been trending lower for the past two weeks, shortly after reaching a closing high near $88.
The pullback in BIDU has helped the stock earn a Stock PowerRatings upgrade to 8. Further selling in this stock will likely lead to further upgrades – particularly given the stock’s distance from its 200-day moving average.
Unlike BIDU, shares of American International Group have slid to within a few cents of their 200-day moving average, where the stock has earned a Stock PowerRatings upgrade to 9. Overall, the
stock has been in a very wide trading range for most of the summer.
But within this range, there have been a number of instances of both oversold and overbought conditions.
Again, given the stock’s location, it may be difficult for short term traders to take a position in AIG. In fact, it may require another bounce and subsequent pullback for traders to find
themselves in an optimal position to take advantage of the selling in the stock.
Sandisk (below) has closed lower for five consecutive trading days in a row. Surprisingly, this aggressive selling in the stock has only resulted in a Stock PowerRatings upgrade to 8.
If there were a stock on the precipice of a further Stock PowerRatings upgrade, then Sandisk may be it. Further selling in SNDK could easily result in a further Stock PowerRatings upgrade to 9 or even 10.
Shares of Westlake Chemical are only recently back above their 200-day moving average – having fallen below that level in early May.
WLK has closed with Stock PowerRatings of 9 for the past three days in a row. As a stock with a Stock PowerRating of 9, Westlake Chemical Corporation belongs to that cohort of stocks that have outperformed the average stock by a margin of more than 9 to 1 in our historical testing.
Looking to the other side of the Stock PowerRatings ledger, there are a few stocks that have earned exceptionally low Stock PowerRatings. These are the stocks that should be avoided by short term traders – or sold short – as their Stock PowerRatings drop to lower and lower levels.
Among these low-rated stocks is the 2-rated stock Leap Wireless (above). Shares of LEAP have closed higher for seven consecutive trading days going into Wednesday’s trading. And insofar as the
stock has traded below its 200-day moving average consistently since late May, these consecutive higher closes have resulted in a very overbought, very low-rated stock.
Note that LEAP has maintained a low, Stock PowerRating of 2 for six straight days leading into Wednesday’s trading. Our research indicates that stocks with Stock PowerRatings of 2 have tended to significantly underperform the average stock. This can make betting against low-rated stocks an effective part of a short term PowerRatings trading strategy.
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David Penn is Editor in Chief at TradingMarkets.com.