With the ETF markets in general wildly overbought for the past several days – going back weeks, really – the number of top rated exchange-traded funds, ETFs with PowerRatings of 8, 9 or 10 – have been fewer in number than they typically are.
But that doesn’t mean that ETF PowerRatings have not had their winners. And, unsurprisingly, when it comes to big ETF PowerRatings winners, we find again an ETF country fund coming out on top.
The fund is the ^EWW^, which earned an ETF PowerRating of 10 on New Year’s Eve. EWW closed at 48.74.
The day before EWW had already signaled its potential as a top ETF PowerRatings trading candidate when it earned an ETF PowerRatings upgrade to 9. This was good news for high probability, ETF PowerRatings traders. Our research into short term ETF behavior going back to 2003, shows that while top-10 rated ETFs have made significant gains nearly 80% of the time – even 9-rated funds made similar gains more than 75% of the time.
Learn more about high probability ETF trading and ETF PowerRatings. Click here.
One day after EWW closed with an ETF PowerRating of 10, the exchange-traded fund soared, closing at 51.00 – above its 5-day moving average and well into overbought territory. The gain? More than 4%. Even a trader who bought the ETF when it earned its PowerRating of 9 the day before would have earned a gain of more than 3%.
As high probability traders, we exit ETF trades on strength – relying either on a close above the 5-period (5-day) moving average or a 2-period RSI of more than 70 to tell us when sufficient strength has developed in order for us to lock in gains. In the case of EWW, both of those exit conditions would have been met a day after the fund earned its 10 PowerRating.
If you looking to leave the world of breakouts (and inevitable breakdowns) behind, and try quantified, high probability trading instead, click here to learn how to trade exchange-traded funds using our ETF PowerRatings.
David Penn is Editor in Chief at TradingMarkets.com.