Biotech Most Oversold Sector in Market

Stock market volatility is likely to be high today as traders react to the unemployment report. ETFs that are already oversold could among the biggest winners if the market moves sharply after the report.

There are only seven ETFs that are oversold with a PowerRatings of 8 heading into trading today and four of those ETFs track stocks in the biotech sector. Housing and utilities round out the potential buy list. No ETFs or leveraged ETFs have a PowerRatings of 9 or 10.

iShares Nasdaq Biotechnology Index Fund (NYSE: IBB) is shown in the chart below. In the past, traders would have enjoyed a number of successful trades using PowerRatings to time entries into this ETF.


PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.

In the past, buying stocks with a rating of 8 on a 5% pullback the next day and selling five days later has been profitable 72% of the time. The average winner has gained 3.9%. Other entries and exits also show high winning percentages and large average gains.

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All data is as of the end of day on 3/6/2014.