TradingMarkets Monday Stock Movers
Stocks are pulling back by more than 1% in the first few hours of trading. The selling comes after two days of strong gains from Thursday and Friday.
When markets are under pressure and trading below their 200-day moving averages, one thing we have noticed time and time again is that it does not take a great deal of buying to turn these markets into overbought ones.
Central Garden & Pet
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PowerRating) Short Term PowerRating 8. RSI(2): 1.66
It is certainly too easy to tell whether or not the selling we are seeing here on Monday will put an end to the bailout-induced rally of last week. But the fact that the Dow is down more than 100 points less than an hour after the open Monday morning is a reminder that stocks, in general, oscillate between overbought and oversold extremes.
Dress Barn Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 2.47
This tendency is so pronounced that it forms the basis of our approach to swing trading: buying stocks as they reach oversold extremes and selling them as they reach overbought extremes. It is an approach to trading that not only tends to produce high win-rate trades with minimal drawdowns, but also mimics the trading approach of professional traders who are constantly on the lookout for opportunities to buy low and sell high.
Knoll Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 7.53
What should swing traders who buy into weakness and sell into strength be doing now? As the markets come in from last week’s highs, traders should be looking for those stocks that have climbed above their 200-day moving averages and have begun to pull back, developing high Short Term PowerRatings of 8, 9 or 10 in the process. These are the stocks that are most likely to outperform when the current selling phase abates.
Sun Healthcare Group
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PowerRating) Short Term PowerRating 8. RSI(2): 3.80
Of the five stocks in today’s report, three have Short Term PowerRatings of 8 and two have Short Term PowerRatings of 9. 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, outperforming the average stock by a 13 to 1 margin over the same time period.
USA Mobility Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 3.10
Note also that all five stocks presented here have pulled back by 10% or more over the past five days. We have found that stocks that are trading above their 200-day moving averages and have pulled back by 10% or more over the past five days have produced positive returns in one-day, two-day and one-week time frames.
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.