Five European ETFs Return to Oversold Extremes
Most European stock markets became oversold last week after Russia’s intervention in the Ukraine. In the first part of this week, several markets recovered and moved back towards a neutral position. Despite a lack of new developments in the region, stock markets in several countries fell back into oversold territory yesterday. Five ETFs tracking European stock market indexes ended yesterday with PowerRatings of 9 or 10.
Aggressive traders should also consider ProShares Ultra MSCI EAFE (NYSE: EFO) with a PowerRatings of 9, as a potential buy. EFO is thinly traded which could result in a large spread between the bid and ask prices. Limit orders can help reduce the trading costs on low-volume ETFs.
EFO is designed to move twice as much as the underlying MSCI EAFE Index on any given day. More than 50% of the components in the EAFE index are stocks that trade in the United Kingdom, France, Germany and Switzerland.
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 9 on a 3% pullback the next day and selling five days later has been profitable 75% of the time. The average winner has gained 4.3%. Buying stocks with a rating of 10 on a 3% pullback the next day and selling five days later has also 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.
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All data is as of the end of day on 3/12/2014.