ETF Buy List Grows as Stock Market Declines
Major stock market indexes were down slightly yesterday. Among the day’s biggest losers were small caps, especially biotechs and other tech stocks. iShares Russell 2000 (NYSE: IWM) fell 1.14% and PowerShares QQQ (NASDAQ: QQQ) was down 0.88%. The decline pushed a number of ETFs into an oversold condition and heading into Tuesday’s trading, twelve ETFs have a PowerRatings of 10.
The table below shows those ETFs. The table is sorted by ConnorsRSI with the most oversold ETFs by that measure at the top. The third column in the table shows how many buy setups have been completed using the rules identified in the book High Probability ETF Trading: 7 Professional Strategies to Improve Your ETF Trading.
|
Symbol |
ConnorsRSI |
High Probability Buy Setups |
|
5.68 |
2 |
|
|
6.83 |
3 |
|
|
6.92 |
0 |
|
|
7.00 |
2 |
|
|
7.09 |
2 |
|
|
7.81 |
2 |
|
|
13.32 |
0 |
|
|
13.79 |
3 |
|
|
15.47 |
0 |
|
|
17.88 |
2 |
|
|
20.30 |
0 |
|
|
23.28 |
0 |
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 10 on a 3% pullback the next day and selling five days later has been profitable 75% of the time with an average winner of 5.9%. Other entries and exits also show high winning percentages and large average gains.
With at least five potential buy signals (PowerRatings of 10, ConnorsRSI less than 20 and 3 additional setups), SPDR S&P Biotech ETF (NYSE: XBI) could be one of the most promising buy candidates.
Biotechs have been at least partly pushed down by news with members of Congress questioning the high price of new drugs and several analysts expressing concerns about overvaluation in the sector. With bad news and quantified buy signals, XBI and other biotech ETFs and stocks should be considered potential buys.
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All data is as of the end of day on 3/24/2014.