Year-End Window Dressing Could Boost FTEK
Fuel-Tech (NASDAQ: FTEK) is up 86.7% since the beginning of the year and could be on the shopping list for portfolio managers engaging in window dressing. Some managers are rumored to buy the biggest winners near the end of the quarter or the end of the year so investors will see the stock listed as a holding in the quarterly filings. This practice may or may not happen but there is a quantifiable tendency for stocks to rise at the end of the month.
In Short Term Trading Strategies That Work, we found that there is a tendency for stocks to outperform in the last few days of the month. We noted that “stocks have been much stronger near months-end than they have been any other time of the month. And, stocks which have dropped a day or two near the end of the month have outperformed the averages even more.”
FTEK has dropped two days in a row heading into the favorable end of month period. The stock also has a PowerRatings of 9.
PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.
In the past, buying stocks with a rating of 9 on a 3% pullback the next day and selling five days later has been profitable 75% of the time. The average winner has gained 4.3%. Other entries and exits also show high winning percentages and large average gains.
FTEK should be considered a potential buy under $7.60.
All data is as of the end of day on 12/24/2013.