Looking for leveraged exchange-traded fund (ETF) trading strategies in all the wrong places?
Rating leveraged ETFs on a scale from 1 to 10, the highest rated leveraged exchange-traded funds in our database have made significant short term gains more than 75% of the time based on our historical backtesting. This makes leveraged ETF PowerRatings an ideal tool for short term traders looking to find the best funds to trade every day.
Of late, a number of leveraged ETFs that had earned top leveraged ETF PowerRatings have advanced from high-PowerRating, very oversold levels. These oversold conditions were in inverse leveraged ETFs, exchange-traded funds that track the opposite of a given market or index, which have been moving lower as the regular markets moved higher day after day.
Let’s take a look at how some of these inverse leveraged ETFs have performed in recent days. Note that all three leveraged ETFs in today’s report earned leveraged ETF PowerRatings of 10 before making their moves higher.
The ^FAZ^, for example, earned a leveraged ETF PowerRating of 10 on April 14.
Two days later, buyers had swooped in to send shares of FAZ soaring by well over 11%.
The opportunity in the ^TYP^ also provided traders with the chance to lower their cost basis when the fund earned top 10 PowerRatings for two consecutive trading days.
Traders who took positions on both the 14th and the 15th, when TYP closed with leveraged ETF PowerRatings of 10 would have been able to exit the trade a few days later when the fund closed above its 5-day moving average for a gain of more than 3%.
The last leveraged ETF I want to highlight is a commodity fund: the ^UCO^.
UCO earned a leveraged ETF PowerRatings upgrade to 10 on April 13. The very next day, the ETF began to respond to the dramatically oversold conditions, gaining well over 3% the first day and well over 4% by the second day.
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David Penn is Editor in Chief at TradingMarkets.com.