Trading Asia: ETF PowerRatings Strategies for Short Term Traders
With Thursday’s sell-off, the number of high rated exchange-traded funds (ETFs), those ETFs that have earned ETF PowerRatings of 8, 9 or 10, has grown dramatically. And while there is still room for additional ETF PowerRatings upgrades, traders looking to make high PowerRatings ETFs a part of their short term trading strategies may want to begin looking at some of those funds that are already becoming attractive as potential trades.
When it comes to high probability ETF trading strategies – including strategies for trading high ETF PowerRatings funds â€” our research indicates that many of the best opportunities for short term traders are to be found among the country exchange-traded funds. These are ETFs that are built to track indexes of national stock markets in countries ranging from China and India to Mexico and Brazil â€” with plenty of European country ETFs and even regional ETFs in between.
Shares of the iShares MSCI Thailand Investable Market Index Fund ETF
PowerRating) closed in oversold territory above the 200-day moving average on Thursday. It was the lowest close for the ETF in the past five days.
Why are country ETFs a key component in ETF trading strategies? Our research, going back to 2003 in the case of ETF PowerRatings funds and since inception for our high probability ETF trading strategies in general, indicates that country ETFs do a better of recovering after short term pullbacks compared to, for example, sector ETFs or commodity ETFs.
This ability to “recover” is called mean reversion and not only is mean reversion part of the secret as to why country ETFs are a top choice for traders using high probability ETF trading strategies and ETF PowerRatings, but mean reversion is also at the heart of what makes high probability trading strategies work. This strategy, referred to as “buying the selling and selling the buying” by TradingMarkets CEO and founder Larry Connors, is one that has been most quantified by rigorous historical backtesting as well as time-testing by specialists, market makers and professional traders who have relied on and profited from this approach to trading for decades.
Despite rallying off its lowest levels of the day on Thursday, the iShares MSCI Hong Kong Index Fund ETF
PowerRating) still closed in oversold territory above the 200-day moving average for the second day in a row.
Included in today’s report are three exchange-traded funds that have earned ETF PowerRatings upgrades to 8. ETFs that earn ETF PowerRatings of 8 have made significant gains in the short term more than 77% of the time. Should we see continued weakness on Friday or even spilling into Monday, then there is a strong likelihood that we will see even higher ETF PowerRatings in a greater variety of funds over the next few days.
David Penn is Editor in Chief at TradingMarkets.com.