Financial Select Sector SPDR (NYSE: XLF) will start trading today with a PowerRatings of 9, the highest rating among yesterday’s top 10 highest volume ETFs.
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.
As an example of the results seen with these signals 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%. Other entries and exits also show high winning percentages and large average gains.
XLF is also oversold on ConnorsRSI, the 2-period RSI and Bollinger Bands ® (%b). The screen below is from Trading Market Analytics which includes these indicators and other hard to find indicators for a thousands of stocks and ETFs.
ConnorsRSI and the 2-period RSI are considered oversold when they are below 20. %b is considered oversold when it is below -0.20.
Financials should be expected to respond to the general trend in the stock market in addition to being sensitive to news from the Federal Reserve. Quantitative easing may have helped financial stocks to grow profits quickly after the recession in 2008 and 2009 and changes to that policy could slow their growth. Of course, if the Fed continues with QE financials could benefit. Since traders have no way of knowing what the Fed will actually do, financials could provide a number of trading opportunities in the current market and in the next few months.
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All data is as of the end of day on 4/10/2014.