PowerRatings and Profit-Taking in Short ETFs
Two days of selling to end the week have helped send the market back toward oversold territory.
The high Short Term PowerRating short/inverse ETFs I have been noting since last Wednesday have been impressive performers over the past few days. The PowerShares UltraShort QQQ ETF, QID
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PowerRating) was up more than 3% on Friday alone. The PowerShares UltraShort Technology ETF, REW
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PowerRating) gained more than 5%.Â
These ETFs are no longer the opportunities they were a few days ago — at least not from the perspective of the sort of high probability trading that is our stock in trade. As these ETFs have rallied, their Short Term PowerRatings have slipped from the “consider buying†range of 8 or higher to the neutral Short Term PowerRating of 5.
This means two things: one, traders who have taken advantage of the pullback in short ETFs should consider taking at least partial profits. The lower Short Term PowerRatings are one signal that the edges have disappeared. Could the ETF continue to move higher? Sure. But the lower the Short Term PowerRating, the less statistical support we have for believing that the ETF — or stock — will continue to advance.
From a slightly larger perspective, declining PowerRatings for short ETFs means that there may be increasing opportunities in regular stocks and ETFs that have been pulling back while inverse ETFs were gaining.Â
United Financial Bancorp
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PowerRating) Short Term PowerRating 9. RSI(2): 1.69
Sequenom Inc.
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PowerRating) Short Term PowerRating 9. RSI(2): 8.44
The Pantry Inc.
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PowerRating) Short Term PowerRating 8. RSI(2): 6.50
The ranks of these stocks are not overwhelming at this point — befitting the relatively neutral status of the market. But above are some of the stocks that short term stock traders may want to keep an eye on over the next few days should sellers return on Monday with the same force with which they ended last week.
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