Ultimate PowerRatings Trading Report: Opportunities in Overbought China, South Africa, Brazil

Even with yesterday’s strong reversal, the number of stocks and exchange-traded funds (ETFs) with PowerRatings of 2 or even 1 remains significant. This means that traders looking for opportunities to take advantage of the overbought conditions that persist in a number of markets – especially country ETFs – may have some luck here on Tuesday.

Recall that ETFs that have earned ETF PowerRatings downgrades to 2 have made significant short term gains less than 24% of the time based on our historical testing. Our lowest rated funds, those with ETF PowerRatings of 1, have only made short term gains 23% of the time. This means that 77% of the time, 1-rated ETFs have lost money in the short term, making them ideal potential candidates for traders looking to sell short.

Country Funds:

From China to South Korea, a number of Asian country funds have earned ETF PowerRatings downgrades to 2. This includes the popular and widely-traded ^FXI^, which crossed above its 200-day moving average intraday on Monday, and the ^EWY^, which closed above its 200-day moving average on Friday.

But better potential opportunities likely will be found in those funds that have earned even more severe downgrades. In this camp we have ETFs like the ^EWZ^ (below) and the ^EWA^.

EWZ Chart

Other country funds earning our lowest ETF PowerRating of 1 going into Tuesday’s trading are the ^EWT^ and the ^EEM^ (below).

EEM Chart


For traders using PowerRatings to help find the best stocks to trade every day, there continue to be opportunities on the long side. But clearly the majority of potential set-ups at present are in stocks that have earned significant PowerRatings downgrades. While none of those few stocks that have earned downgrades to 1 are worth considering (2 out of the 3 in the current roster are stocks of companies that have actually been acquired recently), there are some stocks that have been downgraded to 2 that traders may want to keep an eye on over the next few days.

Among these low-rated stocks are a number of energy companies including ^RIG^ (below) and ^HAL^, as well as financials like ^MA^.

RIG Chart

Find out more about what Ultimate PowerRatings can do for you and your trading. Quantified ratings for stocks, ETFs and leveraged ETFs – all in one place.Click here to launch your free, 7-day trial to our Ultimate PowerRatings today.

David Penn is Editor in Chief at TradingMarkets.com.