One of the great things about trading leveraged exchange-traded funds (ETFs) is that they give traders in general – and high probability traders in specific – opportunities to trade a variety of markets. And even more importantly, and especially for high probability traders, you don’t have to leave your quantified, backtested, mean reversion strategies behind when you add leveraged ETF trading to your overall trading agenda.
As the markets have become increasingly overbought, I have been pointing out potential opportunities in leveraged ETFs – chiefly leveraged inverse ETFs.
Leveraged inverse ETFs – from the ^SDS^ to the ^FAZ^ – track the opposite of their underlying index. So when markets like the S&P 500 and the Dow Jones Oil & Gas Index are becoming radically overbought, ETFs like the SDS and the FAZ that track the inverse of these markets are becoming radically oversold.
And if you’ve spent any time at all around high probability ETF trading, then I don’t need to tell you what it means when we can find markets that are radically oversold.
The best tool we have found for spotting these kind of extreme oversold opportunities are Leveraged ETF PowerRatings. Launched earlier this year, leveraged ETF PowerRatings evaluate leveraged and inverse leveraged ETFs on a scale of 1 to 10. Funds rated 2 and 1 are considered ETFs to avoid – or sell short. On the other hand, leveraged exchange-traded funds that earn leveraged ETF PowerRatings of 8, 9 or 10 are considered funds that ETF traders should consider buying on pullback.
Included in today’s report are three leveraged exchange-traded funds – all of which have earned Leveraged ETF PowerRatings of 8 in the case of the two, leveraged inverse gold-related funds, and 10 in the case of the leveraged inverse technology fund.
For ETF traders looking for opportunities to trade in a market that is running away to the upside, the high Leveraged ETF PowerRatings of funds like Direxion Technology Bear 3x Shares, the ProShares Ultra Gold ETF and the DB Gold Double Long ETN, may be just what you are looking for.
Leveraged ETF PowerRatings. Quantified. Backtested. Free for a Week. Click here to learn more.
David Penn is Editor in Chief at TradingMarkets.com.