Top Rocket Stocks for Week: Walter

Updated from 7:11 a.m. EDT

Each week I hunt for stocks that I believe have the potential to climb higher in coming days. I compile and publish these ideas every Monday in the Rocket Stocks portfolio.

With the market's recent volatility, the best way to trade lately has been to find beaten-down stocks that have both short-term catalysts and strong fundamentals.

With such potentially volatile stocks, all you really need is a small chance that the shorts will start to panick on a rise in stock price, driving up the share price further as the shorts are forced to cover their bearish bets.

Back-testing on the Nasdaq 100 stocks shows that that a stock that drops 10% in a day will, on average, be 2% higher one week later. Conversely, if a stock is up 10% in a day, it is usually down one week later.

But before we delve into this week's Rocket Stocks, let's take a quick look at how last week's picks performed.

• Basic Energy Services BAS: Up 17.3% on the week.
• Arch Chemicals ARJ: Up 8% on the week following earnings.
• Atlas America ATLS: Up 7.7% on the week.
• NYSE Euronext NYX: Up 5.3% on the week.
• Bidz.com BIDZ: Finished the week up 1.8%, but was had been up about 10% following earnings earlier in the week.
• Nvidia NVDA: Up 0.7% after missing earnings but getting an analyst upgrade.
• California Pizza Kitchen CPKI: Flat on the week after an earnings beat and raised 2008 outlook
• Kaiser Aluminum KALU: Finished the week down 1%, but had been up some 12% ahead of earnings.
• Blackboard BBBB: Up 5% following an adjusted earnings beat midweek, but ultimately ending the week down 1.2%.
• LeapFrog LF: Down 4.9% on several Wall Street downgrades.

Now let's take a look at the Rocket Stocks for the Week of May 12-16.

First up this week is Shaw Group SGR, which could pop if investors start flocking back into construction companies.

Shares of Shaw Group have been under substantial pressure, down from an all-time high of roughly $77 primarily due to a belief that a U.S.-led slowdown will affect the broader global construction market.

Despite the recent drop in share price, Shaw Group has maintained its previous guidance for the 2008 year. With an almost $8 billion backlog and 68% of the that backlog going to be converted to revenue over the next 24 months, Shaw Group offers a potential snapback play.