ETF PowerRatings: Trading Strategies and Opportunities in the Americas
The recent pullbacks in U.S. markets join a number of markets around the world that have already been under the sway of significant selling early in 2010.
This selling has been readily apparent in the pullbacks in country exchange-traded funds like the ^EWZ^, which has fallen from 78 to nearly 73 over the past 5 days.
This aggressive selling has helped EWZ earn an ETF PowerRatings of 10 – our highest rating – ahead of Tuesday’s trading. Recall that our research into ETFs, going back to 2003, indicates that exchange-traded funds earning our highest ETF PowerRating made significant short term gains nearly 80% of the time. This is based on thousands of simulated trades in a wide variety of exchange-traded funds – including funds like EWZ.
Also earning high ETF PowerRatings going into Tuesday’s trading is another country fund, the ^EWW^.
EWW was featured a few days ago in my “ETF PowerRatings Winner of the Week: Viva La Country Fund” column, after making a gain of more than 4% shortly after earning an ETF PowerRating upgrade to 10 back on December 31.
Click here if you missed “ETF PowerRatings Winner of the Week: Viva La Country Fund”)
With an ETF PowerRating of 9, EWW made its first close in oversold territory on Friday. Additional selling will only make the fund that much more attractive to high probability, mean reversion based traders.
Lastly is a regional fund. Regional funds are ETFs that include among their components the major stocks from a countries in a specific geographic region such as Asia or Europe. In this case, the regional fund is the ^ILF^.
Like EWW, ILF has earned an ETF PowerRating of 9. ILF has fallen from more than 50 to nearly 47 over the past few days, closing in oversold territory for three out of the past four days. The last time ILF was as oversold as it currently is was in late December, shortly before the ETF’s run from less than 46 to nearly 50 by mid-January.
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David Penn is Editor in Chief at TradingMarkets.com.