ETF PowerRatings Strategies: Betting on BRICs, Belgium and H20
Going into trading on Thursday, many of the highest rated ETF PowerRatings funds belong to the category of country and regional funds.
When it comes to high probability trading, country and regional funds are among the most sought-after markets to trade. This is because compared to other categories of exchange-traded funds, such as sector funds and commodity funds, ETFs based on countries or regions do a better, more consistent job of moving back and forth from oversold extremes to overbought extremes. And it is this mean reversion tendency that puts country and regional exchange-traded funds at the top of our list when it comes to finding the best ETFs to trade every day.
Right now, with most country ETFs oversold, there are a variety of country and regional ETFs for high probability traders to choose from. These range from exchange-traded funds representing the so-called BRIC nations of Brazil, Russia, India and China to specific ETFs representing countries like Canada, Hong Kong, and even Belgium.
Let’s take a look at a few of these oversold, high ETF PowerRatings markets.
Among those ETFs entering Thursday with ETF PowerRatings of 9, are funds like the ^EWO^ and the ^EWK^ (below).
Shares of EWK were upgraded from an ETF PowerRating of 8 to an ETF PowerRating of 9 on Wednesday’s close. The ETF has closed lower for two out of the past three days, with the most recent close well into oversold territory above the 200-day moving average.
With regard to regional funds, there are a number of oversold regional funds based on the BRIC nations. These include the ^BKF^, the ^BIK^ – both of which have ETF PowerRatings of 9 – and the ^EEB^, which has a top ETF PowerRating of 10 (below).
A fund like EEB has been on the radar of high probability traders in general – and ETF PowerRatings traders in specific – for the past few days. EEB earned an ETF PowerRating of 8 on January 13, then earned an upgrade to 9 on the following day and a further ETF PowerRating upgrade to 10 the day after that. A modest bounce took EEB’s ETF PowerRating back to 9 before Wednesday’s selling took the fund back to an ETF PowerRating of 10.
Recall that our research, which includes data going back to 2003, indicates that ETFs with ETF PowerRatings of 10 have made significant short term gains nearly 80% of the time. This is based on thousands of simulated trades involving most of the widely-traded, non-leveraged, non-inverse ETFs.
The last ETF for today’s report is actually a sector fund: the ^PIO^.
PIO has closed lower for two out of the past three days, with Wednesday’s close in oversold territory above the 200-day. PIO is in some ways both a sector ETF and a commodity ETF insofar as the fund consists of stocks like ^NLC^, which is a water treatment company, and ^VMI^, which specializes in industrial metal products including materials for irrigation systems.
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David Penn is Editor in Chief at TradingMarkets.com.