The 10% Down Rule: Stepping Up to the Plate With 3 PowerRatings Stocks

  • December 8, 2009
  • David Goodboy

This morning’s aggressive selling on the heels of growing strength in the U.S. dollar has spooked many stock market bulls.  Worse than expected earnings outlooks from several major DJIA components has further added to the bearish tone of the early trading session.

The average short term investor sees sharp sell offs as the start of the next bear market, joining the selling, sometimes in a panicked state. While the professional short term investor sees the selling as a time to buy at bargain prices.  Noted author, investor and market researcher, Larry Connors, calls what the professionals do, “buying the selling and selling the buying”. 

We have quantified and tested this observation on a huge data set going back to 1995.  One profit making, actionable discovery made  during the extensive research is that if a stock drops 10% or more over the last 5 days the odds are greater that it will rise over the next 5 days than continue to drop. The one caveat is that the price of the shares must be above its 200-day Simple Moving Average.

Below this average, all bets are off if the sell off will continue or not. Combining this statistically proven premise with our Stock PowerRatings has resulted in a stock picking method that places the short term odds squarely on the side of the investor using such information.

For those of you unfamiliar with Stock PowerRatings they are a statistically based tool that is built upon 14 years of studies into the inner nature of stock prices.  It ranks stocks on a scale of 1 to 10 with one being the most volatile and most likely for short term drops and 10 proven to be the most probable for gains over the next 5 days.

Let’s step up to the plate with 3 names that fit the 10% down rule, thus likely for gains over the next 5 days:

Abercrombie & Fitch
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BioCryst Pharmaceuticals
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Bridgeport Eduction
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Learn more strategies for trading stocks in the short term with a free trial to our PowerRatings! The highest rated stocks have outperformed the average stock by a margin of more than 14.7 to 1 after five days! Click here to launch your free PowerRatings trial today!

David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.