TradingMarkets Monday Stock Movers
In the first few hours of trading on Monday, stocks are doing their best to put the sharp sell-off from Friday behind them. Here are three stocks that took advantage of last week’s weakness in order to put in bargain-creating pullbacks for short-term traders.
While a number of traders were actually hoping for perhaps a little more weakness in the first few days of the trading week in order to create all the more pullback opportunities, the Friday sell-off did help drive a number of stocks into deeply oversold territory. Although we have not seen as many very high, 9 or 10-rated stocks in our lists as of this morning, it is worth noting that all three of these stocks with Short Term PowerRatings of 8 have exceptionally low 2-period RSI values of less than 3.
Let’s take a look at the stocks:
Perdigao S.A.
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PowerRating) Short Term PowerRating 8. RSI(2): 2.94
I mentioned a few days ago that while we do not necessarily recommend shorting stocks with low Short Term PowerRatings when those stocks are above the 200-day moving average, we can use these situations to help anticipate potential pullbacks.
Note how it was a low Short Term PowerRating downgrade in late May that set up the pullback in Perdigao in early June, a pullback that has been accompanied by a significant increase in the stock’s Short Term PowerRating from 3 when the stock peaked out to 8 most recently.
Syniverse Holdings Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 2.24
Again, in the PowerRatings chart of Syniverse Holdings, we see how low Short Term PowerRatings can help anticipate pullbacks. The first instance of this in SVR came in the first half of May, as a rally brought the stock’s Short Term PowerRating down to 3 shortly before the stock corrected sharply on May 21st.
And in that high Short Term PowerRating correction were the seeds of another rally, as the stock moved back up from near $20 to $22 over the next five days. SVR has dropped sharply again in early June, creating another high Short Term PowerRating opportunity for traders.
Valence Technology Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 1.95
One last example of the low Short Term PowerRating signal at work comes in the PowerRatings chart of Valence Technology. The stock appeared to break free from a sideways consolidation in early June. However, this breakout was accompanied by a downgrade in the stock’s Short Term PowerRating.
As we have seen in our previous examples, the result was a failed breakout and a correction, as the low Short Term PowerRatings again anticipated weakness in the stock going forward. Four days after VLNC’s Short Term PowerRating was downgraded, the stock was nearly 24% lower – and sporting a “consider buying” Short Term PowerRating of 8.
Note that all three stocks in today’s report have Short Term PowerRatings of 8. Our research indicates that stocks with Short Term PowerRatings of 8 have outperformed the average stock by a margin of more than 8 to1 after five days.
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David Penn is Senior Editor of TradingMarkets.com.