Where the Pullbacks Are: ETF PowerRatings Strategies for Financials and Oils
With the pre-market futures moving lower Monday morning, the potential for a pullback in the broader markets is increasing as the new week begins. For traders looking for strategies to take advantage of these pullbacks in the event that they occur, ETF PowerRatings are an excellent tool for separating the potentially great opportunities from the merely good ones.
Recall that the highest rated, PowerRatings exchange-traded funds (ETFs) – those with ETF PowerRatings of 10 – have made significant short term gains nearly 80% of the time. Even those ETFs that have earned ETF PowerRatings of 8 and 9 have outperformed more than 75% of the time in the short term.
Click here to learn more about ETF PowerRatings.
For the past several months, leadership in the markets has come courtesy of two sectors: financials and energies. And when markets pull back, it is often these two sectors that are leading the way lower. Of the 14 highest ETF PowerRatings funds for Monday, 6 have exposure to the financial sector while 7 are related to the energy sector (the odd fund out? The country fund called the iShares MSCI South Africa ETF
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PowerRating), with an ETF PowerRating of 8.)
Let’s take a look at a few of those financial and energy related ETFs that have earned ETF PowerRatings of at least 8 going into trading on Monday. Traders should keep an eye on these ETFs over the next few days in the event that further market-wide weakness helps create even more oversold conditions in exchange-traded funds such as these.
The iShares Dow Jones U.S. Energy Sector ETF
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PowerRating) (above) has closed lower for the past three consecutive days, which has helped the fund earn an ETF PowerRating of 8. In fact, the past two days have found IYE closing in oversold territory above the 200-day moving average, as well. IYE is among the more oversold of the sizable number of oversold energy ETFs going into trading Monday morning.
Also lower among energy ETFs is the S&P Oil & Equipment Services SPDRS ETF
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PowerRating) (below). Like IYE, XES has closed lower for the past three consecutive trading days, with two of those days in oversold territory above the 200-day.
Lastly, let’s take a look at an oversold, 8-rated financial ETF. Although there are a number of financial ETFs with ETF PowerRatings of 8, most have 2-period RSIs in the neutral range. An example of this kind of ETF is the iShares Dow Jones U.S. Financial Services ETF
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PowerRating) (below).
IYG has a 2-period RSI of approximately 58. The fund has closed lower for three out of the past four days (the one day in that four during which IYG did not close lower, the fund ended the day unchanged).
Isn’t it time you gave PowerRatings a try? Our top-rated ETFs have been correct nearly 80% of the time since 2003. Click here to launch your free, 7-day trial to our ETF PowerRatings today!
David Penn is Editor in Chief at TradingMarkets.com.