PowerRatings ETF Trading Strategies: Fading the Bounce?
The oversold conditions that had been becoming only more extreme over the past week finally resulted in the bounce that we expected.
Now what should Short Term PowerRatings traders do with it?
Our trading strategies over the past several weeks have been clear-cut: when markets are oversold, we are looking to buy high Short Term PowerRatings stocks that are trading above their 200-day moving averages and have low, 2-period RSI values. These are the stocks that have historically outperformed the average stock in the short term.
This is the basic trading strategy for Short Term PowerRatings. In fact, it would not go too far to say that buying stocks on pullback was the reason why Short Term PowerRatings were created in the first place.
However there is another type of pullback in a security trading above its 200-day moving average that our Short Term PowerRatings can help traders take advantage of: those are pullbacks in short ETFs.
Because most markets indexes and sectors have been trading below their 200-day moving averages, the majority of short ETFs based on market indexes like the S&P 500, the Russell 2000, and sectors like technology and finance are actually trading above their 200-day moving averages. This means that ETF traders who use short ETFs such as those from ProShares or Rydex or other fund families can use our Short Term PowerRatings with short ETFs the same way stock traders do with stocks.
With the big rally on Wednesday, a number of short ETFs pulled back dramatically — some more than others. And while some of these ETFs have also had significant drops in their 2-period RSIs, none yet have the sort of high Short Term PowerRatings that allow us to offer them as credible trading opportunities right now.
All it would take to change this view, of course, is more bullishness, more Short Term PowerRatings and more upside. Should we see these factors fall into place, then high probability trading opportunities in high PowerRating short ETFs may not be far away.
Does your stock trading need a tune-up? Our highest Short Term PowerRatings stocks have outperformed the average stock by a margin of nearly 17 to 1 after five days.
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Whether you have a trading strategy of your own that could use a boost or are looking for a way to tell the stocks that will move higher in the short term from the stocks that are more likely to disappoint, our Short Term PowerRatings are based on more than a decade of quantified, backtested simulated stock trades involving millions of stocks between 1995 and 2007. Click the link above or call us at 888-484-8220, extension 1, and start your free trial today.