ETF PowerRatings: Trading Telecom, Trading Housing, Trading Tech

With markets pulling back last Friday, the number of potential high probability trading opportunities is as high as it has been in weeks.

Yesterday I noted a few of the markets where high probability traders in general – and ETF PowerRatings traders in specific – may want to begin looking for some of these opportunities. (See my “ETF PowerRatings: Trading Strategies and Opportunities in the Americas” column). Today, I want to expand that list by moving from country funds – which are always at the top of our list when it comes to looking for high probability ETF trading opportunities – to include a number of sector exchange-traded funds that have also earned high ETF PowerRatings.

First up is the continued weakness in the telecommunications sector, as represented by the iShares Dow Jones U.S. Telecommunications Index Fund ETF ^IYZ^

IYZ Chart

IYZ has earned a top ETF PowerRating of 10 going into trading on Tuesday. In fact, IYZ has been upgraded repeatedly over the past few days as the fund has pulled back deeper into oversold territory above the 200-day moving average.

IYZ has closed lower for three out of the past four trading days. The funds last three closes have been in oversold territory.

Sellers have also been aggressive in the semiconductor market, which has meant lower prices for exchange-traded funds like the ^SMH^.

SMH Chart

Down three out of the past five trading days, the SMH has earned an ETF PowerRating of 8 ahead of Tuesday’s open. Also oversold above the 200-day moving average is the ^XSD^, which has an ETF PowerRating of 9. The high PowerRatings in both ETFs are indicative of the pullbacks in technology.

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The last sector we will look at briefly this morning is the homebuilding sector.

XHB Chart

Shown above, the ^XHB^ has earned an ETF PowerRating of 9 after closing lower for four out of the past five trading days. The Friday pullback in XHB was so sharp as to earn the ETF one of the biggest ETF PowerRatings upgrades of the day – climbing from an average rating of 6 to a top rating of 10.

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David Penn is Editor in Chief at