remember its the rating change that moves stocks over the short term, not the absolute rating which is as you point out, heavily bullish overall upgrades still outnumber downgrades as far as I can see, but the gap has been narrowing in the last few months. More importantly, you can pick and choose upgrades and downgrades to trade in equal numbers so that you the trader are not biased to the long side. I am not implying that this is an easy strategy, there are a lot of suspicious selling into the upgraded stock, even on strong days for the broad market.
Friday December 12 had a bunch of great news plays that worked out well from the time that the upgrade/downgrade came out. 9:15AM EPIC started with a Strong Buy at Needham;target $16...http://finance.yahoo.com/q/bc?s=EPIC&t=1d 9:31AM XICO started with an Outperform at RBC; target $15...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=xico 9:34AM HAL upgraded at Morgan Stanley...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=hal 9:37AM ADBE -- Hearing that stock cut to Neutral from Buy at Pacific Crest...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=adbe 9:42AM UHS cut to Mkt Perform at Bernstein...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=uhs 9:55AM DISH: Hearing market chatter that co is open to an acquisition by SBC...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=dish 10:10AM SONS seen as key vendor in AT&T service...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=sons 10:17AM Metal Mngm't cut to Neutral at DA Davidson...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=mtlm 10:32AM Cirrus Logic started with a Buy at FBW; target $12...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=crus 11:05AM SOV Chatter 22.81 +1.06: Strength in Sovereign Bancorp (SOV) shares being attributed to renewal of takeover chatter...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=sov 11:17AM TRDO -- Pacific Growth suggesting that co has won a contract at AT&T...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=trdo 11:29AM CLST reiterated Strong Buy with $21 target at Southwest Sec...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=clst 11:34AM WPI defended at BofA...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=wpi 1:46PM RATE director buys 10,000 shares...http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=rate
I recently subscribed to flyonthewall.They seem to make alot of pretty good timely calls.As far as trading upgrades and downgrades,i prefer to always be in several stocks than betting it all on one position.I also look to play stocks that have been upgraded or downgraded but haven't really moved much(preferably no more than 1or 2%) from the previous day's close or if the upgrade/downgrade comes out during the market open,where the stock hasn't really made a significant move yet.No guarantees of course,but it seems like a good way to reduce your risk.