This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

This Relative Strength Play Is Ready to Explode

Stocks in this article: FUEL AGIO

 DELAFIELD, Wis. (Stockpickr) -- Lots of people freak out whenever markets are dropping like they are right now -- but not me. I get ridiculously excited!

>>5 Hated Earnings Stocks You Should Love

The reason I get excited when markets are getting hit hard by the bears is that when your trading screens are a sea of red, it's very easy to identify strong names that aren't being hit in the overall market weakness. These strong names are displaying relative strength, which is simply a measure of how strong a stock is compared with the overall market. The thinking here is that if the bears can't take a stock down when they're in full control of the markets, then that stock has potentially exhausted its sellers and the buyers are in control.

Wall Street has conditioned traders and investors to buy stocks that are going down during big market corrections. That strategy is not a wise one, unless the stock has found a bottom and has finished its downtrend. If you buy a stock that's displaying relative weakness in market drops, then you're going to get caught trying to catch a falling knife. A better way to approach market corrections is look for the stocks that aren't going down and are displaying relative strength. These names are often setting up to be the next big movers and for good reason: They have buyers.

>>3 Huge Stocks on Traders' Radars

A perfect example of this can be seen in the performance of Agios Pharmaceuticals (AGIO) today, which is soaring higher by 24% to over $44 a share. On Friday, as the market was hammered lower, shares of AGIO actually closed higher at $35.48, back above the stock's 50-day moving average of $35.03 and well above its intraday low of $31.42 a share. Now, to be fair, AGIO had big news today after the company reported that its blood cancer drug, AG-221, showed promising clinical activity. That said, it still wasn't going down on Friday, which was a signal that the stock had real buyers.

Other stocks hitting my scans that aren't going down on this solidly red day include American Apparel (APP), Acorda Therapeutics (ACOR), Sarepta Therapeutics (SRPT), Questcor Pharmaceuticals (QCOR) and J.C. Penney (JCP). All of these stocks are displaying relative strength intraday, so traders should now keep a close eye on how they close to see if the bulls remain in charge.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,600.25 +243.38 1.40%
S&P 500 2,041.01 +28.12 1.40%
NASDAQ 4,713.1480 +68.8360 1.48%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs