Swing Trading the Rate Cut Reaction: 3 Stocks and 2 ETFs for Traders
Once again, a late rally in stocks was trumped by an even later sell off, leaving both the Dow industrials and S&P 500 in the red on the day.
At this point, there should be no surprise when markets do as they did on Wednesday. If the market truism is in fact true that markets will do that which displeases most of the people most of the time, then the idea that a post-Fed rate cut rally might be undercut by the short of late session selling that has become almost standard in this bear market is one that probably could — if not should — have been anticipated by those bidding shares higher in the final hour of trading yesterday.
As always, though, the most important question is what to do next.
Thoratec Corporation
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PowerRating) Short Term PowerRating 9. RSI(2): 23.75
Towne Bank
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PowerRating) Short Term PowerRating 8. RSI(2): 24.39
Questcor Pharmaceuticals
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PowerRating) Short Term PowerRating 8. RSI(2): 16.32
ProShares UltraShort Russell Mid-Cap
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PowerRating) Short Term PowerRating 8. RSI(2): 16.53
ProShares UltraShort QQQ
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PowerRating) Short Term PowerRating 8. RSI(2): 16.07
Traders who feel like the market was better represented by Tuesday’s 10% up day in the Dow should focus on those stocks above that have high Short Term PowerRatings and relatively — but not exceptionally or extremely — low 2-period RSIs.
On the other hand, traders who are sensitive to the reality that, in a bear market, the path of least resistance tends to be downward may want to instead pay more attention to the two inverse, or short, exchange-traded funds listed here. Because ETFs tend to have lower volatility than stocks, the fact that these funds have comparable 2-period RSIs to the high PowerRating stocks, is a feature worth underscoring.
Of the five stocks and ETFs in today’s report, there is one with a Short Term PowerRating of 9 and four with Short Term PowerRatings of 8. Our research into short-term stock price behavior since 1995 indicates 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 outperformed the average stock by a margin of more than 13 to 1 after five days.
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