Swing Trading the Bailout: 5 Stocks for Traders
Which is the true take-away from Friday’s market action? The fact that markets gapped up at the open by impressive double-digits? Or the fact that many of these same markets were actually down on an open-to-close basis?
I’ve been spending a lot of time looking at exchange-traded funds, particularly those that are proxies for stock market indices such as the Dow industrials and S&P 500. What seems worth noting is the fact that, for example, the Dow Diamonds and the S&P 500 SPDRS both opened significantly higher on Friday morning compared to their Thursday closes. But the Diamonds, which opened on Friday just north of 116, closed at 113.57. And the S&P 500’s SPY opened on Friday at 126.70 and closed just north of 124.
Does this mean that Friday’s bounce is not to be believed? Even with the selling intraday, many of these markets still ended up very much higher relative to their Thursday closes. And those who were long these markets did well.
But what cannot be disguised is the fact that there are a large number of markets that are now overbought. This means that many of the stocks that comprise these markets — the S&P 500, the Nasdaq, the Russell 2000 — are increasingly overbought as well.
What does this mean for the swing trader who buys weakness and sells strength? Now is a time for profit-taking and patience, perhaps on a larger scale that what we’ve dealt with recently. That said, the trading attitude remains the same: taking profits on positions that have gains, and remaining patient for those most oversold markets and stocks to materialize after the inevitable selling that meets every overbought market.
USA Mobility Inc.
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USMO |
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PowerRating) Short Term PowerRating 9. RSI(2): 3.10
Radio Shack
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RSH |
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PowerRating) Short Term PowerRating 8. RSI(2): 4.72
First Cash Financial Services
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FCFS |
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PowerRating) Short Term PowerRating 8. RSI(2): 6.89
Dress Barn Inc.
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DBRN |
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PowerRating) Short Term PowerRating 8. RSI(2): 2.47
Transact Technologies
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TACT |
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PowerRating) Short Term PowerRating 8. RSI(2): 19.57
Of the five stocks in today’s report, four have Short Term PowerRatings of 8 and one has a Short Term PowerRating of 9. We found in our research that stocks with Short Term PowerRatings of 8 have outperformed the average stock by a margin of more than 8 to 1 after five days. Stocks with Short Term PowerRatings of 9 have fared even better, besting the average stock by a margin of more than 13 to 1 over the same, short-term, time frame.
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