Weak Economic Data in China Leads to Stock Market Pullback in South Korea
Weakness in China’s economy could lead to a slowdown in South Korea. Moody’s Investor Service warned investors on Thursday that the largest risks to the South Korean economy are slow growth in China and high levels of household debt in Korea. Neither problem appears to be a major concern in the short-term but South Korean stocks have sold off over the past week.
iShares MSCI South Korea Index Fund (NYSE: EWY) is now oversold and will start trading today with a PowerRatings of 8. The ETF closed yesterday just above its 200-day moving average, shown as the gold line in the chart below. Buying pullbacks when ETFs are above their 200-day moving average has been a profitable strategy in the past.
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.
EWY is the only country ETF with a PowerRating buy signal.
All data is as of the end of day on 2/20/2014.