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At the close on Monday, iShares MSCI Thailand (NYSE: THD) and Direxion Daily Russia Bear 3X ETF (NYSE: RUSS) were oversold with ConnorsRSI readings below 20. THD had a ConnorsRSI reading of 11.48 and RUSS ended the day with a reading of 19.02 on the indicator.
In addition to being oversold on ConnorsRSI, both ETFs were oversold on Bollinger Bands® (%b) with readings below -0.20. ETF Trading with Bollinger Bands details precise entry and exit rules for trading based on this indicator.
Both ETFs are also potential buys based on strategies detailed in High Probability Trading for International ETFs, the first time our research has shown that mean reversion is applicable in the prediction of short-term moves in global stock markets. The strategies in this guidebook do not rely on momentum or other widely followed indicators to identify buy candidates. Some variations of these strategies have win rates of more than 80%.
Other indicators confirm these two ETFs are oversold. RUSS meets the criteria outlined in our guidebook, High Probability Trading with Multiple Up & Down Days. We demonstrated that buying ETFs after extended losing streaks could be profitable. Back-testing shows that buying an ETF with multiple down days after an additional 5% pullback has been profitable more than 80% of the time. In the back test, trades are closed when ConnorsRSI ends the day above 70. This setup has also been profitable with other entries and exit rules.
THD is a potential buy with a PowerRatings of 9. As an example of a trading strategy for that indicator, in the past, buying stocks with a rating of 9 on a 3% pullback the next day and selling after the stock closes above its 5-day simple moving average has been profitable 75% of the time with an average gain of 4.3%. Other entries and exits also show high winning percentages and large average gains.
Now let’s look at the most overbought and oversold stocks (according to ConnorsRSI) heading into trading for October 7, 2014. ConnorsRSI is a proprietary and quantified momentum oscillator developed by Connors Research that indicates the level to which a security is overbought (high values) or oversold (low values).
CTCM (Ctc Media) is the most oversold stock for the second day in a row with a ConnorsRSI reading of 1.70.
YMLP (Yorkville High Income MLP ETF) is the most oversold non-leveraged ETF with a ConnorsRSI reading of 6.79.
EDZ (Direxion Emrg Mkts Bear 3X) is the most oversold leveraged ETF with a ConnorsRSI reading of 14.51.
BAK (Copene-Petroquimica Do Nordeste) is the most overbought stock with a ConnorsRSI reading of 95.29.
CORN (Teucrium Corn) is the most overbought ETF with a ConnorsRSI reading of 92.82.
TradingMarkets Lists provide users pre-populated lists of stocks and ETFs identifying symbols with overbought and oversold ConnorsRSI and Bollinger Bands® readings. The Screener Lists are powered by The TradingMarkets Screener.
All data is as of the end of day on 10/6/2014.