With pre-market futures indicating a strong open, the likelihood of overbought conditions in most stocks and ETFs remains high as the week begins. The ^SPY^ enters the week with an ETF PowerRating of 6, while the ^QQQQ^ earned an ETF PowerRating of 7. The highest PowerRating among widely-traded funds is the 10-rating in the Semiconductor HOLDRS ETF (see below), while the lowest ETF PowerRating for Monday belongs to the 1-rated ^EWZ^. More about Brazil below.
The semiconductor sector is among the most oversold going into Monday. This means that PowerRatings traders may want to pay attention to stocks in the sector such as ^CAVM^, which earned a Stock PowerRating of 8, as well as a host of 7-rated stocks ranging from ^BRCM^ to ^OVTI^.
The highest rated stocks in the Dow industrials have Stock PowerRatings of 6 – very much in neutral territory. These stocks include: ^T^, ^MCD^ and ^DIS^. Some of the stocks that have earned top ratings for Monday include ^S^ (below) and ^MOT^ among the S&P, and ^FSLR^ among the Nasdaq 100.
In the broader universe of top-rated stocks outside the S&P 500 and Nasdaq 100, PowerRatings traders may want to look at 9-rated stocks such as ^GRNB^ and the under-$10 ^PWAV^.
Exchange-traded funds/Leveraged ETFs
Semiconductors continue to be one of the more active sectors when it comes to PowerRatings. The ^SMH^ (below) earned an ETF PowerRating of 10 going into trading on Monday.
The recent past of SMH as a 10-rated ETF is a good study in the potential rewards of scaling into funds as their PowerRatings reach ever more exceptional levels. Traders, for example, who divided their trading unit into multiple tracts (up to four) and bought into SMH as it moved lower in late June were able to take better advantage of the rally in the ETF that occurred in the first half of July.
Among leveraged ETFs, one of the few top-rated funds is the ^BZQ^ (below), which earned its third upgrade to 10 since May.
The past two times BZQ has earned a top rating of 10 have been excellent opportunities for PowerRatings traders. By the time the ETF closed above its 5-day moving average in both instances, the fund had gained more than 3%.
BZQ has closed lower for the past three days in a row leading into Monday’s trading.
PowerRatings traders looking at the short side of Brazil might also want to keep an eye on other short country funds like the ^FXP^, with a Leveraged ETF PowerRating of 8.
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David Penn is Editor in Chief at TradingMarkets.com.