Traders and investors who doubt that we are in a bull market may have had some of those doubts put to rest yesterday as a wildly overbought market looked poised to sell off – only to find buyers step in late in the session to bid markets off their intraday lows.
As Larry Connors has been noting for months in the market commentary section of his Daily Battle Plan, this is how stocks, exchange-traded funds and the traders that trade them behave during bull markets. Overbought conditions develop and often seem to last forever, while oversold conditions are often short and fleeting.
This makes it a little difficult sometimes for high probability traders looking to take advantage of weakness. But for those who rely on tools like ETF PowerRatings, finding those instances where sellers have pushed markets into oversold territory is easier than ever.
Going into trading on Tuesday, we have a few ETFs that have earned ETF PowerRatings upgrades to 8 or higher. Our research into short term ETF price behavior going back to 2003 shows that ETFs that earn ETF PowerRatings of 8 or higher have tended to make significant short term gains more than 75% of the time.
The highest rated of these ETFs for Tuesday is the ^EWT^.
EWT gapped down on Monday and, even though buyers bid the fund higher by the time of the close, the gap down was enough to earn the ETF a major PowerRating upgrade to 9. Note that the last time EWT had an ETF PowerRating of 8 or more was in late February, just before the fund soared nearly 5% in just over five days.
A number of exchange-traded funds representing stock markets in India have also made our top ETF PowerRatings list for Tuesday. Of the three – all of which have ETF PowerRatings of 8 – the most oversold is the ^EPI^.
Monday marked the second consecutive day that EPI has had an ETF PowerRating of 8. Like EWT, EPI was last exceptionally overbought in late February, when its high ETF PowerRatings anticipated an advance of nearly 10% over the next five days.
The last fund in today’s report is a sector fund, the ^XSD^.
XSD has closed lower for the past three days, helping the ETF become more oversold that the fund has been since late January when the fund last earned top ETF PowerRatings. With a 2-period RSI of 16 and two consecutive closes below the 5-day moving average, XSD is one of a few semiconductor ETFs that high probability traders in general – and ETF PowerRatings traders in specific – should keep on their watchlists.
Isn’t it time you gave ETF PowerRatings a try? Our top-rated ETFs have been correct nearly 80% of the time since 2003. Click here to launch your free, 7-day trial to our ETF PowerRatings today!
David Penn is Editor in Chief at TradingMarkets.com.