The Christmas Rally is in Full Effect: Any Opportunities Still Left?

The Christmas rally this year has been impressive. Stocks are lining up for their fourth solid up session in a row. Timothy Geithner making the clear statement that there will be no double dip to the crisis combined with the cyclical odds of an up Christmas week has simply sent stocks on a wild ride higher.

This upward surge, however bullish, presents a dilemma for many traders. Have all the opportunities for short term gains been taken by the masses? While the market itself may be over extended, opportunities still exist in individual stocks for a bullish move over the short term. The question has been how to locate these stocks primed for gains from the majority that have already moved higher?

We have developed an easy to use, fully tested system to help you locate these shares regardless of overall market conditions or questionable veracity of cycles. It is a simple 3 step process for picking stocks most likely for gains over the next week timeframe. This article will explain this simple technique and provide 3 companies fitting each of the steps for your consideration.

The first and most critical step is to only look at stocks trading above their 200-day Simple Moving Average. This assures that a strong, long term up trend is in place, increasing the odds that you are not buying into a falling knife or catching a stock in a death spiral.

The second step is to drill deeper into the list locating stocks that have fallen 5 or more days in a row or experienced 5 plus consecutive lower lows. Yes, you heard me right, fallen 5 or more days in a row. I know this is counter-intuitive of conventional wisdom of buying stocks as they climb higher. However, our studies have clearly proven that stocks are more likely to increase in value after a period of down days than after a period of up days.

The third and final step is a combination of whittling the list down even further by looking for names whose 2-period RSI (RSI(2)) is less than 2 (for additional information on this proven indicator click here) and the Stock PowerRating is 8 or higher.

The Stock PowerRatings 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 least likely for short term gains and 10 proven to be the most probable for gains over the next 5 days. In fact, 10 rated stocks have shown to have a 14.7 to 1 margin of outperforming the average stock in the short term.

The stocks that fulfill each of the above steps have proven in extensive, statistically valid studies to possess solid odds of increasing in value over the 1 day, 2 day and 1 week time frame.

Here are 3 stocks that are poised for short term gains:

Euro Tech Holdings
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CLWT |
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Wonder Auto Tech
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WATG |
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WATG chart

Aixtron Aktiengesellschaft
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AIXG |
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PowerRating)

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.