Strong Get Stronger: Swing Trading and Momentum
Stocks fell for most of the day on Thursday before rallying powerfully into the close leaving the Dow up 2% and the S&P 500 up 1%.
There are two modes that should be of interest to swing traders who use our Short Term PowerRatings. The first mode is the mode in which we find out trading opportunities to the long side and the short side, in stocks and in exchange-traded funds. This mode consists of stocks or ETFs that are pulling back, perhaps as a result of profit-taking, but still trade above their 200-day moving averages. This mode also consists of stocks or ETFs that are rallying, sometimes strongly, but trade below their 200-day moving averages.
These two situations describe our opportunity mode. It is an unusual, but frequently recurring moment in the markets when short-term trader psychology gets ahead of itself, making good stocks too cheap and bad stocks too expensive. Our Short Term PowerRatings help us identify these moments, signaling the good stocks on sale with high Short Term PowerRatings of 8, 9 or 10, and branding the bad stocks that are overvalued with low Short Term PowerRatings of 1 or 2.
The other mode is the normal, trending mode. This is the mode in which stocks that are strong and trading above their 200-day moving averages are moving higher, and those stocks that are weak and trading below their 200-day moving averages are moving lower. This is what we tend to expect in markets — it is the stuff that momentum and trend traders feed on.
It is also the mode we find ourselves in right now.
There are some opportunities for swing traders, listed below as they appeared as of the Thursday close. But while the late-day rally helped make a few stocks and indexes less oversold than they were the day before, we still have a situation where the strong — mostly inverse ETFs — are getting stronger and the weak — most of the rest of the world of stocks and ETFs — are getting weaker.
AlPharma Inc.
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ALO |
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PowerRating) Short Term PowerRating 9. RSI(2):
Sequenom Inc.
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SQNM |
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PowerRating) Short Term PowerRating 8. RSI(2):
Anheuser-Busch Companies Inc.
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BUD |
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PowerRating) Short Term PowerRating 8. RSI(2):