Try combining this pattern with PowerRatings
In today’s article we’re going to cover an
Advanced
PowerRatings
strategy. TradingMarkets Director of Education, Steve Primo, teaches advanced
PowerRatings
classes every week day (click
here for more info).
To recap:
From 1995-2005, stocks rated 7 have outperformed the S&P 500 by a better than
4-1 margin over a five-day period. Stocks rated 8 have outperformed the S&P 500
by a better than 8-1 margin; stocks rated 9 have outperformed the S&P 500 by a
13-1 margin, and those stocks that have achieved a 10
PowerRating have
outperformed the S&P 500 by a 16.9-1 margin. On the other hand, stocks rated 1, 2 and 3 have
under performed the S&P 500 over a five-day period.
Bearing in mind that stocks with low
PowerRatings
under perform the S&P 500, let’s take a look at a pattern for short selling.
Shorting Pattern #1: Inside Day
Quite simply an inside day is a day where the daily price range is completely
within the prior day’s price range. In other words, it has a lower high and higher
low than the previous day.
Here’s an example:
Inside days can be a sign of exhaustion on the part of buyers when an uptrend
becomes extended. They can offer good risk/reward trades as your stop loss needs
to be only slightly above the previous day’s high.
In the chart below you can see an inside day that
leads to a reversal. This inside day was accompanied by a low
PowerRating
and as you can see the stock declined over the next five days.
In the next two charts, both stocks had consecutive
inside days, combined with low
PowerRatings
that were followed by declines over the next five days.
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class on how to use
PowerRatings
presented by Steve Primo, our Director of Education.
Ashton Dorkins
Editor-in-Chief
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