One of the themes of 2012 has been the way that traders and active investors have moved away from many of the high-yield, high-dividend consumer defensive stocks that outperformed in 2011. This has been the topic of a number of columns over at TradingMarkets (see “Finding Value in Value ETFs” and 3 Dividend Stock ETFs for Active Investors.
So it was little surprise to see the pullback in the PowerShares High Yield Equity Dividend Achievers Portfolio ETF (NYSE: PEY), as the fund started to sell off after a trading range that extended back for a month.
PEY sold off for three days in a row, earning “consider buying” ratings of 8 out of 10 on the second day of the sell-off, and earning a one-point upgrade to 9 out of 10 a day later as the fund continued to pullback. This kind of high rating in an ETF often can be a signal that the fund has fallen as far as it is going to fall in the short-term. And by scaling into ETFs that have earned these ratings (at least an 8, and 9 or higher for more conservative traders), traders can both get and increase their exposure as the positive, historical edges increase.
Active investors who took advantage of short-term weakness in PEY were able to buy the ETF after it has finished in exceptionally oversold territory. In fact, by waiting for PEY to develop PowerRatings of 9, traders were able to buy the bottom of the sell-off and sell that position into strength just days later.
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