Time for Swing Traders to Wait Out the Momentum Market
The sell-off that began with the overbought conditions before Election Day continued on Tuesday, with the Dow industrials, Nasdaq and S&P 500 all down approximately 2% or more.
We are in oversold territory to be sure. However, we are no more oversold that we were last week, or in late October. Stocks are likely to bounce and move higher in the near-term over the next few days, if only to relieve some of the oversold condition that has once again developed.
What does this mean for swing traders? We are in a market that is rewarding momentum. If you were making money on Monday, then you likely made money on Tuesday — at least to the short side. Still, our research suggests that this momentum will reach an extreme against which stocks will react. And that reaction is what will likely set us up for the next trading opportunities in high Short Term PowerRatings stocks and ETFs.
The high Short Term PowerRatings ETFs will be short exchange-traded funds, that allow traders to buy the inverse of a sector, style of investing such as growth or value, as well as whole market indexes. We have found these to be better opportunities in many respects that betting against individual stocks with low Short Term PowerRatings.
The high Short Term PowerRatings stocks will be those stocks trading above the 200-day moving average for whom that reaction will serve as an opportunity to enter the oversold stocks on pullback.
No new stocks for today. The stocks from my last column, “5 PowerRatings Stocks for the Next 5 Days”, with the exception of Telecommunication Systems, Inc.
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PowerRating), which was up more than 4% on Tuesday, all still have Short Term PowerRatings of 8 or 9.
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