Think Local, Trade Global: ETF Trading Strategies for the Far East and Africa
When it comes to strategies for trading exchange-traded funds (ETFs), we almost always prefer to trade country ETFs, exchange-traded funds based on the entire national stock markets (or representative stock indexes), over other types of ETF. Although our high probability ETF strategies – including ETF PowerRatings strategies – work with a variety of ETFs, from equity index to sector and commodity – all else equal, we choose country ETFs more often than not.
Click here to learn more about how to trade using ETF PowerRatings.
Why? Because in our testing, we have observed that country ETFs move back and forth between overbought and oversold extremes more reliably than most other ETFs. And because high probability ETF trading in general – and ETF PowerRatings in specific – helps traders take advantage and trade this movement from oversold to overbought and back again, country ETFs almost always are at the top of our list when markets sell-off and steep pullbacks above the 200-day moving average are plentiful.
Going into trading on Tuesday, there are at least three country ETFs with the sort of high ETF PowerRatings that high probability traders look for. One has an ETF PowerRating of 9 and the other two have ETF PowerRatings of 8. All three are likely to become even more attractive as potential trading candidates should the broader market retreat further in the short term.
Starting from the top, the iShares MSCI Australia Index Fund ETF
(
EWA |
Quote |
Chart |
News |
PowerRating) (above) is not only one of our top rated country ETFs, EWA is also among our highest rated funds in general going into Tuesday’s trading.
EWA has pulled back for two out of the past three trading days, and has closed in oversold territory above the 200-day moving average for three consecutive days. The fund’s 2-period RSI has twice closed below 10 – a significantly oversold reading for an exchange-traded fund.
Closing lower for four days in a row is the iShares MSCI South Africa Index Fund ETF
(
EZA |
Quote |
Chart |
News |
PowerRating), which has earned an ETF PowerRating of 8. (see below).
EZA has closed in oversold territory for four days in a row, helping drive the ETF’s 2-period RSI down below 6 going into trading on Tuesday.
It’s worth knowing that not all country exchange-traded funds (ETFs) are based on single countries. Some country ETFs – like the iShares MSCI Pacific ex-Japan Index Fund ETF
(
EPP |
Quote |
Chart |
News |
PowerRating) – include not just the stock markets of individual nations, but of nations in a given geographical region.
In the case of EPP (above), the exchange-traded funds includes stocks from countries in the Pacific region – such as Australia, Hong Kong, New Zealand and Singapore, but excepting Japan.
EPP has closed lower for three out of the past four days, and failed to hold on to its highest levels on Tuesday (though the ETF did close in the green). Having closed in oversold territory for three consecutive trading days going into Tuesday, EPP earned an exceptionally low 2-period RSI of less than 5 as of Tuesday’s close.
Remember that our highest rated, ETF PowerRatings funds have made significant short term gains nearly 80% of the time. Even those ETFs rated 8 and 9 have made gains in the short term more than 75% of the time in our backtesting going back to 2003.
Find out more about what ETF PowerRatings can do for you and your trading. Click here to launch your free, 7-day trial to our ETF PowerRatings today.
David Penn is Editor in Chief at TradingMarkets.com.