Silver Gains Set Up Buy in Inverse ETFs
iShares Silver Trust (NYSE: SLV) is overbought after gaining 7.2% last week. As SLV became overbought, ProShares UltraShort Silver (NYSE: ZSL) has become oversold. ZSL has been oversold for most of the past two weeks. The longer a market is oversold, the more likely it is to reverse. Heading into the open on Monday, ZSL is oversold with a PowerRatings of 10.
PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.
In the past, buying stocks with a rating of 10 on a 3% pullback the next day and selling five days later has been profitable 75% of the time. The average winner has gained 5.9%. Other entries and exits also show high winning percentages and large average gains.
ZSL is also oversold on a number of other indicators. Trading Market Analytics provides a screen that shows ConnorsRSI, the 2-period RSI, Bollinger Bands ® (%b) and other indicators that are not widely available. ConnorsRSI and the 2-period RSI are generally oversold when they are below 20 and Bollinger Bands (%b) is considered oversold below -0.20.
ZSL should be considered a strong buy on additional weakness.
All data is as of the end of day on 2/14/2014.