This Week’s Best Performing PowerRatings’ Stock: RIMM
Today’s
PowerRatings article looks at the best performing stock for the past five
days– Research In Motion
(
RIMM |
Quote |
Chart |
News |
PowerRating).Â
The chart below shows that RIMM had dropped for 3
straight days from September 26th to September 28th. This coincided with a
PowerRating of 7 on 9/28/06, suggesting it was likely to outperform the S&P 500 over
the next five days.
Also we can use a few technical indicators to
further investigate a position. In most cases I like to use the 2-period
Relative Strength Index (RSI). The RSI tells us the strength of a stock
relative to its past performance, in this case the previous 2 days. RIMM’s
RSI was at a very low 15.88 (bottom indicator circled in red). With a low
RSI reading below 30 we can see that the stock has been sold pretty hard
indicating that sellers may be done selling and that a move back up was likely.Â
RIMM is also above its 200-day simple
moving average
telling us that it is in a confirmed uptrend. These indicators along with
a PowerRating of 7 made RIMM a strong buy on 9/28/06.
Over the next four days RIMM
gained 26.42%.
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From 1995-2005,
stocks with a PowerRating of 8 have outperformed the S&P 500
index on average by an 8.3-to-1 margin, while a PowerRating of 10 doubles that
performance to 16.3.
PowerRatings also help indicate a stock’s
downside as well as timely short-sale entry points; PowerRatings of 1 and 2 have
on average lost money over the next week. A PowerRating of 1 typically
underperformed the S&P 500 by a 5-1 margin. Obviously, you should ideally be
looking to buy high PowerRating stocks and avoid (or short) low PowerRatings
stocks.
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Click here to
try
PowerRatings for yourself, risk free.
Darren Wong
Associate Editor
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Reminder: We are in no way recommending the purchase or short sale of these
stocks. This article is intended for education purposes only. Trading should be based on your own understanding of market conditions,
price patterns and risk; our information is designed to contribute to your
understanding. Controlling risk through the use of protective stops is critical.
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