TradingMarkets Danger Zone: 3 Gold Stocks for Swing Traders
Stocks are off to a strong start on Thursday, following Wednesday’s 400+ decline in the Dow industrials.
At TradingMarkets, we tend to have a bias to the upside. We tend to look to buy stocks rather than sell them short and have been fortunate to develop a number of trading strategies and methodologies that allow us to successfully trade stocks to the long side even when the broader markets are under pressure.
By sticking with high Short Term PowerRatings stocks that are trading above their 200-day moving average, and looking to buy these stocks as they pullback, we and traders using our Short Term PowerRatings have managed to do well over the past year of otherwise declining markets.
Yamana Gold Inc.
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PowerRating) Short Term PowerRating 2. RSI(2): 88.29
But traders who are looking to take advantage of declining markets can find our Short Term PowerRatings to be helpful allies in their trading, as well. We have found that stocks that have our lowest Short Term PowerRatings, ratings of 1 or 2, have tended to underperform the average stock in the short term by significant margins. This makes these stocks, these low, Short Term PowerRatings stocks, particularly attractive as potential short selling candidates.
Companhia de Minas Buenaventura
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PowerRating) Short Term PowerRating 2. RSI(2): 91.54
One key caveat: when looking to sell stocks short, we suggest that traders limit their targets to those that are trading below their 200-day moving averages. The edges that we have found in betting against low Short Term PowerRatings stock are most pronounced and significant when those stocks are trading below their 200-day moving averages, as opposed to above them.
Harmony Gold Mining
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PowerRating) Short Term PowerRating 2. RSI(2): 98.16
The current rally in gold mining shares provides us with an opportunity to see many of these low Short Term PowerRatings stocks in action. All three of the stocks in today’s report are from the gold and silver mining industry, all are trading below their 200-day moving averages, and all have the sort of low Short Term PowerRatings that we have found often anticipate underperformance in the near-term.
Another key feature of these three mining stocks is that they all have 2-period RSIs of more than 80 as of Wednesday’s close. This marks these stocks as significantly overbought and potentially vulnerable to reversal based on this factor alone. When combined with their low Short Term PowerRatings, and the fact that all three trade below their 200-day moving average, the likelihood that these three stocks will underperform the average stock over the next few days is great.
Does your stock trading need a tune-up? Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of nearly 17 to 1 after five days.
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Whether you have a trading strategy of your own that could use a boost or are looking for a way to tell the stocks that will move higher in the short term from the stocks that are more likely to disappoint, our Short Term PowerRatings are based on more than a decade of quantified, backtested simulated stock trades involving millions of stocks between 1995 and 2007. Click the link above or call us at 888-484-8220, extension 1, and start your free trial today.
David Penn is Editor in Chief at TradingMarkets.com.