Going into trading on Tuesday, many funds are overbought. Many of these overbought conditions have relaxed somewhat in the wake of Monday’s trading, which saw many exchange-traded funds open higher and then close lower. Among these ETFs were the ^SSO^, the ^TYH^ and the ^FAS^.
Today I want to focus on those exchange-traded funds that have earned top Leveraged ETF PowerRatings for trading on Tuesday.
EPV earned a Leveraged ETF PowerRating of 9 as of Monday’s close. The fund has closed lower three days in a row, losing nearly another 2% on Monday.
EPV is trading at its most oversold levels since mid-April. The last time the ProShares UltraShort MSCI Europe ETF closed with an ETF PowerRating of 9, the fund was higher five days later by more than 6%.
Closing lower for three days in a row and moving lower again early in trading on Tuesday, EFU earned a Leveraged ETF PowerRating of 9.
Like EPV, EFU is as oversold as it has been since April. However, this has been the first time this year that the ProShares UltraShort MSCI EAFE ETF has earned a Leveraged ETF PowerRating of more than 8.
JPX is not as liquid as EPV and EFU, and traders looking to take advantage of the high Leveraged PowerRating upgrade in this fund should keep that in mind. ETFs with less than average liquidity often can have erratic and exaggerated price moves – another reminder of how stops can do less than advertised for short term traders trading mean reversion strategies.
JPX is unique among the three leveraged exchange-traded funds in today’s report in trading below the 200-day moving average. While the 200-day moving average is an important – if not critical – indicator for traders using stocks and non-leveraged ETFs, it is relatively less important for traders trading leveraged ETF PowerRatings. For more information on trading leveraged ETFs and the 200-day moving average, click here to read Larry Connors’ article, Applying the 200-Day Moving Average to Leveraged ETFs.
Find out more about what Leveraged ETF PowerRatings can do for you and your trading. Click here to launch your free, 7-day trial to our Leveraged ETF PowerRatings today.
David Penn is Editor in Chief at TradingMarkets.com.