Up Days, Exit Days and ETF PowerRatings: Selling the Buying in EWK

Monday’s up day provided high probability traders in both stocks and ETFs with what may be the early stages of exit opportunities in any one of a sizable number of top-rated exchange-traded funds (ETFs) that had become oversold in recent days.

One of those top rated exchange-traded funds was the ^EWK^, which earned an ETF PowerRating of 10 ahead of trading on Monday and rallied back into overbought territory (one of the exit signals I mentioned yesterday – click here if you missed it).

EWK Chart

Above EWK earned an ETF PowerRatings of 10 last Thursday and again on Friday. Six days later, the fund was up 3%.

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There still remain a large number of exchange-traded funds in oversold or just-outside-oversold territory – despite the move up on Monday. This is a testament to just how oversold markets had become in the second half of January (though, as I pointed out a few days ago, our research indicates that there is often reason for high probability traders to look optimistically at aggressive selling near month’s end.

While there is only one 10-rated ETF in our database, there are still over 80 exchange-traded funds that as of Tuesday’s open, have ETF PowerRatings of 9. And our research shows that ETFs that have earned ETF PowerRatings of 9 have made significant short term gains more than 75% of the time since 2003. This is based on thousands of simulated trades in many of the market’s most widely traded ETFs: from the ^SPY^ to the ^QQQQ^.

What are some of those exchange-traded funds still sporting top ETF PowerRatings going into trading on Tuesday? Here are two – both country funds – that high probability traders who weren’t long going into Monday’s oversold rally, may want to consider as the markets overall continue their recovery from oversold lows.

With a 2-period RSI still in the neutral range and an ETF PowerRating of 9, the ^EWA^ is one of a number of country funds that has retained its top rating going into Tuesday.

EWA Chart

Another international country/regional fund for traders to be on the lookout for is the ^EPP^.

EPP Chart

Like EWA, EPP bounced on Monday, but did not make it to a close above its 5-day moving average or into overbought territory with its 2-period RSI. This, combined with the fund’s high ETF PowerRating, makes it a market worth watching – particularly as long as it remains below overbought levels.

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David Penn is Editor in Chief at TradingMarkets.com.

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