Silver Offers Trading Opportunity
Precious metals have had a difficult year. SPDR Gold Shares (NYSE: GLD) is down almost 28% since the beginning of 2013 and iShares Silver Trust (NYSE: SLV) has fallen more than 35%. While the long-term outlook in these markets remains uncertain, a potential buying opportunity has developed in silver. A small rally in the past week has pushed SLV up 4.6% and the ETF is now oversold with a ConnorsRSI of 82.35. As silver rallied, inverse funds tracking the metal have become oversold.
ProShares UltraShort Silver (NYSE: ZSL) closed yesterday with a ConnorsRSI reading of 17.19 and a PowerRatings of 8.
In the past, buying ZSL when the PowerRatings reached 8 or higher has captured profitable short-term moves. In October, profits could have been increased by scaling into positions. ETF Scale-In Trading provides details on an effective entry strategy that could increase your profitability.
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 8 on a 7% pullback the next day and selling five days later has been profitable 74% of the time. The average winner has gained 6.3%. Other entries and exits also show high winning percentages and large average gains.
ZSL should be considered a buy on additional weakness.
All data is as of the end of day on 12/26/2013.