For today's PowerRatings strategy, let's take a look at j2 Global Communications (JCOM).
JCOM hit a new 52 week high in January then suddenly sold off sharply. The decline even included a 10% drop in one trading day! Does this decline signal a major top and trend reversal, or is it just a correction in an ongoing uptrend? This is a tough question to answer but looking at a long-term chart does yield some other very useful information.
Over the past few years JCOM has responded very well to its 200-day moving average. JCOM has performed very well when it is trading above the 200-day moving average and struggled to make any progress while below it. Also, tests of the 200-day moving average have been significant -- often providing very good entry points.
So, knowing that the 200-day moving average provides good support, as it neared that level we should be looking for a buy signal. And, if you take a look at the RSI you'll notice a positive divergence -- suggesting the decline is losing momentum. These indicators coming together are a positive sign, but what if you could add one final piece to the puzzle? How about being able to add a statistical edge to your trade? By using PowerRatings you can do that. On 02/21/06 JCOM registered a of PowerRating 8.
In the four days since then JCOM is up almost 10%.
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