ETF Trading: Why Conservative Traders Trade ETFs Above the 200-Day
With a growing number of exchange-traded funds trading below their 200-day moving averages, traders should understand that even if ETFs are earning top PowerRatings, the edges will likely be greater among those funds that are still trading above their 200-day moving averages.
All things equal, an ETF with top PowerRatings of 8 or higher is an ETF that has pulled back to levels from which it has historically made significant gains. But insofar as trading is a game of maximizing edges, the more conservative strategy for ETF trading in the current market may be to stick with those ETFs that are trading above their 200-day moving averages – signifying uptrends that are likely still intact – rather than below their 200-day moving averages.
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Here are 7 ETFS You Need to Know for Tuesday.
Earning top PowerRatings ahead of trading on Tuesday are more than 50 exchange-traded funds. Among them are sector ETFs like the ^XLY^, as well as country funds like the ^EWD^.
Both ETFS have pulled back for the past two trading days.
Also set to open with our highest PowerRatings on Tuesday morning are exchange-traded funds like the ^XME^, which pulled back by more than 2% in trading on Monday.
XME earned a one-point upgrade after Monday’s pullback.
Homebuilding and real estate related funds have also earned some of our highest PowerRatings heading into trading on Tuesday. These include funds like the ^RWR^ and the ^VNQ^.
Among the most liquid and widely-traded leveraged ETFs, the highest rated is the ^SSO^. The fund was actually downgraded by a point after Monday’s session, but remains the top rated non-leveraged ETFs heading into trading on Tuesday.
A sizable number of exchange-traded funds are trading below their 200-day moving averages, including some of the highest volume funds in our database such as the ^XLF^. XLF has been trading below its 200-day since the beginning of the month.
David Penn is Editor in Chief of TradingMarkets.com