Waiting for the Break: PowerRatings Strategy Review
Stocks ended the week on a selling note, as the markets continued to move in a largely sideways fashion for a fourth consecutive session.
The sideways action in the markets have allowed for overbought conditions in the S&P 500, Dow industrials and Nasdaq Composite to be worked off somewhat. All three of the tracking ETFs for these markets, the S&P 500’s
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PowerRating), the Dow industrials’
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PowerRating) and the Nasdaq 100’s
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PowerRating), all have low to neutral Short Term PowerRatings of 4. And with 2-period RSIs in the 40s, the major markets are providing few clues as to where the next edges are likely to be found.
This means that the appropriate strategy for short term traders in stocks and ETFs right now is patience. Part of trading with high probability short term trading strategies is being able to be disciplined and avoid trading when high probability opportunities are not present. And with neutral PowerRatings and 2-period RSIs, we know that few stocks if any will be found in either oversold or overbought extremes.
Of the stocks mentioned in my last column, 5 PowerRatings Stocks for the Next 5 Days, two of the ETFs in that column, the ProShares Short S&P 500 ETF
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PowerRating) and the ProShares Short MSCI EAFE ETF
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PowerRating) have moved higher and closed above their 5-day moving averages as of Friday. Traders who took positions in these ETFs when they were on sale should recognize the close above the 5-day moving average as a show of strength worth taking profits from.
Of the other stocks, Tower Group Inc.
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PowerRating) and Duncan Energy Partners
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PowerRating), are still in pullback mode and are still worth watching by short term traders. Gammon Gold
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PowerRating) closed below its 200-day moving average on Friday and, while still dramatically oversold, is not the place for new capital at this time.
Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of nearly 17 to 1 after five days. Click here to start your free, 7-day trial to our Short Term PowerRatings!