PowerRatings, Short ETFs and the Move to Neutral
A midday rally countered by a late session sell-off left stocks more or less in neutral mode on Wednesday.
In yesterday’s column (“PowerRatings: Out of the Oversold and Into the Higherâ€), I urged caution and patience as the most sensible trading strategy for PowerRatings traders right now.
Whether you are trading stocks or trading ETFs in the short term, the edges that appeared to be setting up only a day before have largely disappeared. Had stocks continued higher, then there was a good chance that we would have seen key Short Term PowerRatings upgrades mostly in short ETFs that are trading above their 200-day moving averages. As we have seen over the past several months, high Short Term PowerRatings short ETFs — just like high Short Term PowerRatings stocks — can be bought on weakness above the 200-day and successfully and profitably sold into strength.
But Wednesday’s selling has, at a minimum, postponed any trading strategy built on buying short ETFs on pullback. And if we continue to see profit-taking become new momentum trades to the downside, then we will change our focus to look for stocks that are still above their 200-day moving averages and have already experienced their pullbacks.
For now, we will continue to wait and see how some of the stocks already offered negotiate the neutrality of the current market. An intraday reversal took DRDGold Ltd.
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PowerRating), one of yesterday’s stocks, from strength back to weakness in Wednesday’s trading, while both Scots Miracle Gro
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PowerRating) and New Jersey Resources {NJR|NJR] essentially moved sideways. The same can be said for most of the stocks from the Tuesday “5 PowerRatings Stocks for the Next 5 Days†column, save for Sunoco Logistics Partners LP
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PowerRating), which has rallied by another four percent on Wednesday.
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