ETF PowerRatings: Trading Opportunities in Overbought Europe
One of the points that Larry Connors brought up in the Morning Commentary section of his Daily Battle Plan (click here to start your free, 7-day trial), was that the current market had become a “just get me in” type of market in which those who were not fully invested in the market – or even not invested at all – were taking advantage of every intraday dip to buy.
And while this is the most sensible approach for long term investors who want to climb on board the bull market (it is a form of “buying the selling” after all), it does make it more complicated for high probability traders looking for pullbacks on an end of day basis.
One solution for many high probability traders in general – and ETF PowerRatings traders in specific – has been to trade inverse leveraged ETFs using Leveraged ETF PowerRatings. I have written a number of articles recently suggesting strategies for traders who are looking to take this route.
Another solution is for traders to take advantage of exchange-traded funds with exceptionally low ETF PowerRatings. Going into trading on Thursday there are seven ETFs that have earned low ETF PowerRatings of 2 and, of this seven, there are two in particular that traders may want to keep an eye on over the next few days.
For example, four out of the seven are Europe-based ETFs. And of these, one, the ^EWP^ is arguably the most vulnerable to reversal to the downside.
EWP retreated to neutral territory on Wednesday, after spending two days in overbought territory below the 200-day moving average. With an ETF PowerRating of 2, EWP may have already begun to react to those previous overbought conditions. But any strength below the 200-day moving average in this fund should continue to be regarded with caution.
Also overbought below the 200-day moving average is the ^PBW^.
Like EWP, PBW has an ETF PowerRating of 2. Unlike EWP, however, the fund has only closed in overbought territory once this week, and slipped from those extreme levels on Wednesday. Currently in neutral territory, PBW is another fund that should be regarded with suspicion should buyers bid the ETF high and back into overbought territory below the 200-day.
Isn’t it time you gave ETF PowerRatings a try? Our top-rated ETFs have been correct nearly 80% of the time since 2003. Click here to launch your free, 7-day trial to our ETF PowerRatings today!
David Penn is Editor in Chief at TradingMarkets.com.