Too Far, Too Fast: 3 Stocks Ready To Fall

• By David Goodboy
• On 11:15 am EDT, Wednesday October 7, 2009

David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.

Our Stock PowerRatings not only identify shares ready for steady up moves, they help you locate stocks prepped for a fall. This knowledge can be put into practice by traders looking for short candidates or investors wanting to take profits after a nice run up.

Just as our research discovered that highly PowerRatings stocks are more likely to advance after a decline, the opposite has also proven to be true. Low PowerRatings stocks after a run up are more likely to decline in value over the short term, less than 5 days. The stock market has just experienced two strong days of gains. Today, it appears that the bulls are taking a breather as shares flirt about the break even level midday. One way our PowerRatings screener filters the market is by locating these low rated stocks.

Here are 3 stocks with the lowest Stock PowerRatings possible of 1 that appears primed for a short term fall:

Align Technology (NasdaqGS:ALGN - News): This dental product company has earned the lowest Stock PowerRatings possible with a 1 rank. They are well known in the dental community for their "Invisalign" teeth straightening. The stock has been in a nice uptrend since August 17th but appears to have hit resistance at $16.50/share and is poised for a short term drop.

Knology Inc (NasdaqGM:KNOL - News): A 1 ranked PowerRating company that owns and operates broadband networks. Shares have spiked higher hitting resistance yesterday at $11.00. They had a nice second quarter but shares seem ready for a short term pull back.

Salix Pharmaceuticals (NasdaqGS:SLXP - News): A gastrointestinal drug maker looks like it may have hit solid resistance in the $24.00/share range. It has been awarded a 1 Stock PowerRating and had a serious gap higher on September 15th. An incredible 51% single day after positive results from a drug test. I would watch this one closely for a short term fall within the next several days.

MDS Inc (NYSE:MDZ - News): Another drug company that appears it may have advanced too far too fast. They have earned a 1 Stock PowerRating. $9.00/share looks like significant resistance with $7.50 being support on the daily chart.

Learn more strategies for trading stocks in the short term with a free trial to our PowerRatings! The highest rated stocks have outperformed the average stock by a margin of more than 14 to 1 after five days! Click here to launch your free PowerRatings trial today!

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Buzz up!