Gold Oversold on PowerRatings and Seven High-Probability Trading Strategies
SPDR Gold Shares (NYSE: GLD) has fallen more than 4.3% from its 2014 highs and has closed lower for four straight days. The ETF now meets the setup rules for all seven buy strategies identified in the book High Probability ETF Trading: 7 Professional Strategies to Improve Your ETF Trading. Gold miner ETFs are also oversold and should be considered potential buys.
Aggressive traders could consider PowerShares DB Gold Double Long ETN (NYSE: DGP), a leveraged ETF designed to move twice as much as the price of gold on any given day, as a possible buy. This ETF meets the requirements of all seven high probability strategies and is oversold with a PowerRatings of 10.
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.
Traders also have a number of short-term signals in gold miner ETFs. Market Vectors Gold Miners ETF (NYSE: GDX) and Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) have PowerRatings of 9. 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 with an average winner of 4.3%.
GDX meets the requirements for 5 of the 7 high-probability trading strategies and GDXJ satisfies the setup rules for 3 of those strategies.
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All data is as of the end of day on 3/20/2014.