Too Far Too Fast: 4 Overbought Stocks for Traders
The number of stocks that are overbought according to our screens is truly staggering. While this means that stocks have a significant amount of bullish momentum behind them, it also means that many of these stocks will not be able to keep up. These are the stocks short term traders should be either avoiding or betting against.
Of the four stocks in today’s report, three have Short Term PowerRatings of 3 and one has a Short Term PowerRating of 2. Our research into short term stock price behavior, research that involved millions of simulated stock trades between 1995 and 2007, showed us that stocks that we granted Short Term PowerRatings of 3 or less were among the worst performing stocks in that time period.
Specifically, we found that 3-rated stocks, after five days, had about 90% of the gain of the average stock. Stocks with Short Term PowerRatings of 2 fared worse, and stocks with Short Term PowerRatings of 1 were truly the stocks that traders should avoid—