Small Caps Oversold After Wednesday’s Selloff

The stock market sold off yesterday and small caps were among the hardest hit stocks. iShares Russell 2000 (NYSE: IWM) fell 1.64% and Direxion Daily Small Cap Bull 3X Shares (NYSE: TNA) dropped 4.97%. Both ETFs ended the day with PowerRatings of 9.

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 these trades 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 9 on a 3% pullback the next day and selling five days later has been profitable 75% of the time. The average winner has gained 4.3%. Other entries and exits also show high winning percentages and large average gains.

TNA is the more aggressive trade but is more likely to trigger an entry order because TNA is designed to move 3% for each 1% change in IWM. Previous PowerRatings buy signals have provided low risk entry points and TNA should be considered a buy under $64.93.


PowerRatings buy signals on IWM have also been seen at low-risk entry levels.


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All data is as of the end of day on 12/11/2013.