Up for the Down Stroke? Swing Trading the Big Bounce
Like a game of duck, duck, goose! played by children amped up on Snapple and birthday cake, days of oversold conditions in the market finally gave way to a powerful rally in the markets. The Dow Jones Industrial Average on Tuesday was up by more than 10%.
How has this changed the game for swing traders who buy weakness and sell strength?
It is a potent testament to how beaten down stocks have become over the past several weeks that even a 10% up day has not created a wealth of quality pullbacks from which to choose the best trades.
There are some opportunities in the market — and I’ll list five potential trade candidates. But we are far from that moment in which quality pullbacks for swing traders are plentiful. And until that time comes — when more stocks are trading above the 200-day moving average than below it — patience (and swing trading oversold inverse ETFs as I have recommended in the past) are the order of the day.
Trex Company Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 18.74
Founding Canadian Coal Trust
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PowerRating) Short Term PowerRating 9. RSI(2): 19.23
Valeant Pharmaceuticals
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PowerRating) Short Term PowerRating 8. RSI(2): 26.45
First Commonwealth Financial
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PowerRating) Short Term PowerRating 7. RSI(2): 32.09
Privatebancorp Inc.
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PowerRating) Short Term PowerRating 7. RSI(2): 28.01
Note that the 2-period RSIs for all five stocks in today’s report are relatively high. Traders may want to keep these stocks on a watch list rather than rush into them Wednesday morning. Generally speaking, single digit, 2-period RSIs are the kind of oversold readings that we like to see in stocks that we are considering for trades to the long side.
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