With ^GOOG^ threatening to withdraw from China due to censorship and privacy issues, we have the kind of sentiment “backstory” that often accompanies a sector pullback.
From the perspective of a high probability trader in general – and an ETF PowerRatings trader in specific – the “cause” of a market sell-off is a secondary concern, if that. As high probability traders, our focus is much narrower: find the oversold market, wait for it to pull back further, buy the weakness, and exit on strength. Everything else – for the most part – is potential distraction.
Going into Wednesday’s trading, both the technology and telecommunications sectors had the exchange-traded funds (ETFs) with the highest ETF PowerRatings. This includes ETFs like the ^IYZ^ which earned an ETF PowerRatings upgrade to 9 on the close on Tuesday.
IYZ has closed lower for five consecutive trading days above the 200-day moving average. Earning an ETF PowerRating of 9 on Tuesday, the fund was upgraded from a 7 the previous day, as IYZ sold off again. With a 2-period RSI of less than 8, IYZ is one of the more oversold – and higher rated funds – going into Wednesday’s trading.
In addition to IYZ, there are also a number of technology-related exchange-traded funds that have also earned significant ETF PowerRatings upgrades for Wednesday. These ETFs include the ^VGT^ which, like IYZ, has an ETF PowerRating of 9.
VGT has closed lower for two days in a row, four out of the past five, en route to a low, 2-period RSI of just under 12.
Last but not least is another technology related ETF, the ^XLK^.
The XLK, like VGT, has closed lower for four out of the past five days, and is now oversold above the 200-day moving average. The fund, which also has a 2-period RSI of less than 12, has also earned an ETF PowerRating of 9. This 9-rating comes after an upgrade from 7, which XLK had for the days leading into Wednesday.
Be sure to check out yesterday’s ETF Daily Analysis piece: “ETF PowerRatings Winner of the Week: Viva La Country Fund!” on the move in the ^EWW^ in the first week of the new year. Click here to launch your free, 7-day trial to our ETF PowerRatings.
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David Penn is Editor in Chief at TradingMarkets.com.