Defensive Sectors Ready to Rise?
Traders are on Fed watch as they wait for a statement at the end of the central bank’s two-day meeting. Most market indexes registered small losses yesterday. The short-term downtrend in the indexes pushed several sectors into oversold territory. ETFs tracking energy, consumer staples and healthcare are all on PowerRatings buy signals. These sectors are generally considered defensive and they could be among the biggest winners even if markets sell off after the news from the Fed hits the markets Wednesday afternoon.
Health Care Select Sector SPDR (NYSE: XLV) 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 these trades 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. The average winner has gained 5.9%. Other entries and exits also show high winning percentages and large average gains.
Consumer Staples Select Sector SPDR (NYSE: XLP) also starts Wednesday’s trading with a PowerRatings of 10.
Direxion Daily Energy Bull3x Shares (NYSE: ERX) starts trading today with a PowerRatings of 9. The stock has been oversold according to PowerRatings for several days, a condition which should increase the likelihood of a price bounce.
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%. 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 12/17/2013.