TradingMarkets Monday Stock Movers
Stocks were being sold aggressively in the first hour of trading on the first trading day of the week, as the discontents from Friday’s massive intraday reversal continue to drive markets lower on Monday.
Beacon Roofing Supply
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PowerRating) Short Term PowerRating 8. RSI(2): 1.68
By all accounts, now is a time for three things: (a) taking profits in short positions, (b) raising cash, and (c) waiting for the deepest pullbacks to create the most oversold conditions possible.
Buckle Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 1.39
We have a long bias and a trading bias, so we will not spend a lot of time on steps (a) and (b) here. One challenge to shorting stocks in this environment has been the fact that markets have not had to reach extreme levels of being overbought before reversing after short term bounces and rallies. Just as a stock begins to move significantly higher in an overbought bounce below the 200-day moving average, sellers have appeared in hordes to knock those stocks back down.
Gibraltar Industries Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 0.285
Raising capital refers to both profit-taking as well as to staying on the sidelines and not committing too much capital at once. We are lucky to have begun the week largely in cash ourselves and are more than willing to watch stocks come in while sitting on the sidelines. The sidelines provide an excellent vantage point to see just which stocks are going to remain above their 200-day moving averages, which stocks are going to earn the 9 or 10 PowerRatings, and where the next trading opportunities may be once short sellers begin covering their positions, bringing stocks higher in the process.
True Religion Apparel
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PowerRating) Short Term PowerRating 9. RSI(2): 1.52
That leaves us with option (c). We don’t believe in buying stocks as they go down. We believe in buying stocks AFTER they’ve reached their oversold extremes. As such, while we are generally in a buying mode on a day when the Dow has lost nearly 500 points within the first few hours of trading, we want to see evidence of extreme levels in the individual stocks – 2-period RSIs of less than 2, losses of 10% or more – before committing precious capital.
Watsco Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 1.76
Of the five stocks in today’s interview, three have Short Term PowerRatings of 9 and two have Short Term PowerRatings of 8. Our research into short term stock price behavior indicates that stocks with Short Term PowerRatings of 8 have outperformed the average stock by a margin of more than 8 to 1 after five days. Stocks with Short Term PowerRatings of 9 have fared even better, besting the average stock by a margin of more than 13 to 1 after the same short term time frame.
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David Penn is Editor in Chief at TradingMarkets.com.