Yesterday’s dramatic reversal back to the upside helped drag a sizable number of exchange-traded funds (ETFs) out of the oversold lows into which they’d begun to fall. If you heard yourself groaning just a bit as the markets rallied late in the day, nearly making up all of the opening gaps lower, then congratulations, you’re starting to think like a high probability trader.
When markets are moving lower, the opportunities for high probability traders tend to rise dramatically. This is because high probability trading is all about what TradingMarkets founder and CEO calls “buying the selling and selling the buying.”
By waiting for markets to pullback, and buying them when they are at oversold extremes, the high probability trading strategies Larry and Connors Research have developed can help short term traders make the sort of high win-rate, low drawdown short term trades that have characterized professional trading for decades.
ETF PowerRatings are just the most recent example of these high probability trading strategies put to work. Our research into exchange-traded funds since 2003 shows that ETFs that have earned ETF PowerRatings of 8 or higher have made significant short term gains more than 75% of the time. Our highest rated funds, those that have earned ETF PowerRatings of 10, actually made significant short term gains nearly 80% of the time.
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For today, the number of top ETF PowerRatings funds is relatively low due to the market’s neutral conditions. There are a few funds however, such as the ^ITB^ (below), that have earned ETF PowerRatings of more than 8 that traders should keep an eye on should sellers return to the market.
There is also one country fund that has earned a top ETF PowerRating for Friday, the ^ECH^ (below).
ECH has closed in oversold territory above the 200-day moving average for three consecutive trading days. The fund is as oversold as it was early in February, just before making a rally from the low 50s to the high 50s by mid-month.
The last exchange-traded fund in today’s report is another sector fund: the ^XLB^ (below):
XLB spent the first half of February dancing along its 200-day moving average. Rallying up and away from its 200-day in the middle of the month, XLB has retreated back toward those levels over the last several days.
Find out more about what ETF PowerRatings can do for you and your trading. Click here to launch your free, 7-day trial to our ETF PowerRatings today.
David Penn is Editor in Chief at TradingMarkets.com.