Asia and Emerging Markets on Sale: ETF PowerRatings Strategies for Traders
With the markets selling off in earnest on Thursday, the number of exchange-traded funds receiving sizable ETF PowerRatings upgrades has soared. Going into trading on Friday, our Top ETF PowerRatings roster includes 5 top rated, 10-rated funds and 21 9-rated ETFS.
Why is this significant for short term traders? Our research into ETFs, going back to 2003, shows that funds that earn ETF PowerRatings of 10 have made short term gains nearly 80% of the time. This is based on thousands of simulated trades in more than a hundred, widely-traded exchange-traded funds.
Even those ETFs with PowerRatings of 9 have made significant short term gains more than 75% of the time.
Click here to learn more about trading ETFs using ETF PowerRatings.
A high number of the ETFs earning top PowerRatings for Friday belong to a subset of the ETF universe called country funds. Country funds or country ETFs are exchange-traded funds that are built to track the stocks of a single country such as Brazil (in the case of the iShares MSCI Brazil Index Fund ETF
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PowerRating)) or of a region like Latin America (for example, the iShares S&P Latin America 40 ETF
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Figure 1. iShares S&P Latin America 40 ETF. With an ETF PowerRating of 9, the ILF has closed lower for two out of the past three trading days, including a drop of well over 3% on Thursday. ILF also has a 2-period RSI of less than 6.
And why do high probability traders in general – and ETF PowerRatings traders in specific – love country ETFs? As I have noted in a number of recent articles, our research suggests that of all the various types of exchange-traded fund, country ETFs move more reliably and consistently between oversold and overbought conditions.
Figure 2. Vanguard Emerging Markets ETF
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PowerRating). Pulling back by nearly 3% on Thursday, the VWO plunged into oversold territory above the 200-day moving average. Also earning an ETF PowerRating of 9, VWO has a 2-period RSI of less than 8 going into Friday’s trading.
And because buying oversold markets and selling overbought markets is the hallmark of high probability trading – including ETF PowerRatings trading – this feature of country ETFs means that these funds will always be near the top of our list when markets pullback, putting a large number of quality, ETFs on sale.
Figure 3. iShares MSCI Australia Index Fund ETF
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PowerRating). The EWA closed in oversold territory for a third consecutive session on Thursday, earning an ETF PowerRating of 9 and a 2-period RSI of less than 7.
I’ve included in today’s report three exchange-traded funds – all of which represent either countries or regions, and all of which have ETF PowerRatings of at least 9. Traders looking for opportunities as markets have begun to pullback may want to consider high PowerRating funds such as these as potential trades over the next few days.
Find out more about what ETF PowerRatings can do for you and your trading. Click here to launch your free, 7-day trial to our ETF PowerRatings today.
David Penn is Editor in Chief at TradingMarkets.com.