ETF PowerRatings Strategies for Traders: Pullbacks in Biotech, Home Building and Banks
With the markets pulling back on Tuesday, a growing number of exchange-traded funds (ETFs) have earned the kind of ETF PowerRatings upgrades that have moved them into the “consider buying” category for short-term traders. Additional weakness in the near term should provide traders with the opportunity to buy shares in some of these funds that the market has put on sale over the past few days.
First up is our highest ETF PowerRating fund: the iShares Nasdaq Biotechnology ETF
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IBB has closed lower for a third consecutive trading day on Tuesday. During this pullback, IBB has gone from a 2-period RSI of more than 40 to a 2-period RSI of less than 10. Incidentally, IBB has been recently highlighted in both 7 ETFs You Need to Know and TradingMarkets Most Overbought and Oversold ETFs of the Day.
There are two 8-rated ETFs that PowerRatings traders may also want to keep an eye on – particularly if sellers re-merge as the dominant force in trading on Wednesday. One of these ETFs is the iShares Dow Jones U.S. Home Construction Index Fund ETF
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Like IBB, the iShares Dow Jones U.S. Home Construction Index Fund ETF has also closed lower for the past three sessions – albeit not as dramatically as IBB. The Tuesday decline in ITB brought the ETFs 2-period RSI lower from above 25 to less than 7, creating a significantly oversold condition in this sector-based exchange-traded fund. ITB includes among its holdings such widely-traded home builder stocks as Lennar
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Last, there are a few financially-oriented exchange-traded funds that have experienced significant selling over the past few days, dropping into oversold territory above the 200-day moving average and earning an ETF PowerRating of 8.
The most oversold of this bunch is the SPDR KBW Bank ETF
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PowerRating). In addition to its ETF PowerRating of 8, KBE has a 2-period RSI of less than 14. The largest holdings in KBE are Citigroup
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Recall that our highest ETF PowerRatings have produced significant gains in the short-term nearly 80% of the time. If you are ready to take your short-term ETF trading to the next level, click here to launch your free trial to our ETF PowerRatings today!
David Penn is Editor in Chief at TradingMarkets.com.