Thursday, August 9

Swing Trading Oversold Stocks

Swing Trading - Finding Oversold Stocks

We all want to find a good strategy that allows us to cash in on oversold stocks and make big bucks fast - here's an interesting video from Lance Jepsen about stategies for finding oversold stocks that have washed out and are likely to bounce. In the video he mentions 'Days to cover' - this is a ratio that measures the future buying pressure on a stock that is almost certain to happen - people who have shorted the stock must buy it back at some point to lock in their profits.

If a stock's price starts to rise rapidly, short sellers will begin to close out their positions, thus creating buying pressure on the stock and driving the price up. If a stock that was down turns very bullish, then short sellers buying back their stocks can cause extra upward momentum and increased losses for any short sellers who are don't close their positions quick enough. The longer the 'days to cover', the more marked this effect can be.