Trade Gaps Down with a Quantified Edge
Each day,
TradingMarkets publishes
7 Trading Ideas for Today, a selection of stocks from our daily indicators. TradingMarkets
Stock Indicators are based upon our latest quantitative research, and
highlight trading edges backed by our database of more than 7-million historical
simulated trades.
On Wednesday,
March 14, American Oriental Bioengineering
(
AOB |
Quote |
Chart |
News |
PowerRating) was
the candidate from the
Gaps Down 5% or More
list.
These are stocks that gap
down by 5% or more and are trading above their 200-day moving average. Our
research shows that stocks trading above their 200-day moving average that gap
down by more than 5% have shown positive returns, on average, 1-day, 2-days and
1-week later. Historically, these stocks have provided traders with a
significant edge.
The
TradingMarkets mantra is to “buy weakness,” and that is exactly what you could
have done here. While everyone in the media was warning of major weakness, our
research shows that these types of oversold conditions create a bullish edge for
stocks.
1-day later, AOB closed
+3.7%.
2-days later, AOB closed +10.5%.
5-days later, AOB closed +11.9%.
Obviously,
results like these do not occur every time, but
our quantified research clearly shows that the edges exist during extreme
oversold or overbought conditions.
Check out our
latest quantified research articles
here. If
you don’t already have a TradingMarkets subscription,
click here
for a free 7-day trial. Check back daily for more 7 Trading Ideas for Today,
and develop your own watchlist of stocks with historically-backed edges.
John Lee
Associate Editor