Watch Out For Stocks On This List
Each day,
TradingMarkets publishes
7 Trading Ideas for Today, a selection of stocks from our daily indicators. TradingMarkets
Stock Indicators are based upon our latest quantitative research, and
highlight trading edges backed by our database of more than 7-million historical
simulated trades.
On Monday,
May 7, industrial goods producer Trex
Company
(
TWP |
Quote |
Chart |
News |
PowerRating) was
a candidate from the our
5 Consecutive Higher Highs list.
These are stocks that have made a higher high for five or more consecutive days
and are trading below their 200-day moving average. Our research shows that
stocks trading below their 200-day moving average that make higher highs for
five or more days have shown negative returns, on average, 1-day, 2-days and
1-week later. Historically, these stocks have provided traders with a
significant edge. To learn more about our research into stocks that make five or
more consecutive lower lows, and how to use this information,
click here.
At TradingMarkets
our philosophy is to “buy weakness, sell strength,” and that is exactly
what you could have done here. On 5/7/07, TWP had made 5 consecutive higher
intraday highs, which told us that the upward surge may be about to lose momentum. The first
red arrow was a
potential short entry into TWP. If the position was covered 5-days later
at the second red arrow, you would have made a quick 8.4% on the trade.
1-day later, TWP was
–4.2%
2-days later, TWP was -4.2%
5-days later, TWP had declined -8.4%
This is an example of an edge
that took just 5 days to unfold.
Obviously,
results like these do not occur every time, but
our quantified research clearly shows that the edges exist during extreme
oversold or overbought conditions.
Check out our
latest quantified research articles
here. If
you don’t already have a TradingMarkets subscription,
click here
for a free 7-day trial. Check back daily for more 7 Trading Ideas for Today,
and develop your own watchlist of stocks with historically-backed edges.
Darren Wong
Associate Editor
Reminder: We are in no way recommending the purchase or short sale of
these stocks. This article is intended for education purposes only. Trading
should be based on your own understanding of market conditions, price patterns
and risk; our information is designed to contribute to your understanding.