Ultimate PowerRatings Trading Report: Leveraged ETFs Earn Top Upgrades (QID, SDS, FAZ, TZA, ERY)
Continued overbought conditions in the U.S. are helping a variety of leveraged exchange-traded funds (ETFs) earn significant PowerRatings upgrades as the trading week begins. Traders looking for the best ETFs to trade everyday should turn their attention to this market insofar as it currently posses some of the biggest edges in the market.
There are no stocks or non-leveraged ETFs that have earned PowerRatings of more than 8. This is due in large part to the oversold rally below the 200-day moving average that has taken place over the past few days.
Because of this, high probability traders using PowerRatings are likely to find stronger potential trading candidates among the 2x and 3x leveraged ETFs that have pulled back to levels from which, historically, they have tended to advance. For example, our highest rated leveraged ETFs have made significant short term gains more than 79% of the time in our testing. These leveraged ETFs, the ones that have earned Leveraged ETF PowerRatings of 10, are the ones that high probability traders should post their trading watchlists.
Earning a leveraged ETF PowerRatings upgrade to 9 on Friday was the ProShares UltraShort QQQ ETF or QID. The fund held an 8-rating for two days before earning the one-point upgrade at the end of last week.
The current upgrade is the first time the fund has earned a leveraged ETF PowerRating of 8 or more in several months.
The last time the ProShares UltraShort S&P 500 Index ETF or SDS earned a leveraged ETF PowerRatings upgrade to 9 was back in mid-June. After three days with a rating of 9, SDS was up by well over 7% within five days.
Presently, SDS has earned a 9-rating for the past two consecutive trading days.
FAZ has not earned a leveraged ETF PowerRating of 9 in several months. And the last time the fund earned an upgrade to more than 8 was back in mid-April. On that occasion, FAZ bolted higher by more than 11% in just two days.
Like the SDS, FAZ earned strong “consider buying” leveraged ETF PowerRatings in mid-June, just before a strong rally that took the fund from $14 to $18 by the beginning of July.
Closing lower for three days in a row heading into Monday’s trading, the Direxion Small Cap Bear 3x Shares are another leveraged ETF that has earned a significant leveraged ETF PowerRatings upgrade.
With an upgrade to 9, TZA has its highest leveraged ETF PowerRating in many months, with not even an 8-rating since early April. The fund’s upgrade to 9 was especially quick insofar as TZA had closed on July 6 with our lowest ETF PowerRating of 1.
ERY has provided more opportunities for short term traders over the past months than have many other leveraged ETFs. Earning an upgrade to 9 in late April, ERY was higher by 9% five days later. In mid-June, ERY earned a leveraged ETF PowerRatings upgrade to 10 and was higher by more than 18% five days later.
ERY earned its upgrade to 9 on Thursday of last week, a rating it maintained as of Friday’s close, as well.
David Penn is Editor in Chief at TradingMarkets.com.