There was an audible sound of relief on Thursday as exchange-traded fund (ETF) traders and investors alike enjoyed a strong, broad-based oversold rally that sent a wide number of ETFs soaring. As just one example, the iShares MSCI Brazil Index Fund ETF (EWZ | Quote | Chart |News | PowerRating) advanced by well over 7%.
Despite yesterday's rally, there are still a significant number of ETFs - including country ETFs - that still have the sort of high, ETF PowerRatings that make them potentially attractive candidates for traders looking to buy markets after they have pulled back. Recall that our trading strategy when it comes to trading ETFs is to, in Larry Connors words "buy the selling and sell the buying," meaning we look to take long positions in markets after they have declined and to exit those positions as markets recover and demand for shares returns.
The Market Vectors Russia ETF (RSX | Quote | Chart | News | PowerRating) gained more than 8% on Thursday. But the steep decline that preceded the rally means that the fund may have more upside to go.
This is no mere contrarian pose. This trading strategy for ETFs and stocks is based by testing years of data involving thousands of simulated trades. It is this process of quantifying the old trading adage of buying low and selling high, that has enabled us to create high probability ETF trading strategies with per trade win rates of more than 80% in many ETFs, as well as our new ETF PowerRatings which make it possible for traders to spot the kind of ETFs that have historically advanced in the short term nearly 75% of the time.
The iShares MSCI South Africa Index Fund ETF (EZA | Quote | Chart | News | PowerRating) had a positive day on Thursday. But the ETF's PowerRating of 9 signifies that there may still be value and opportunity before the fund's oversold bounce runs its course.
What is interesting about those high ETF PowerRatings funds for Friday is that a sizable number of these ETFs are country funds. As many of you know, our testing has revealed that equity index and country-based ETFs have outperformed both sector and commodity-based ETFs in our testing. This makes these funds potentially all the more worth considering for short term ETF trades.
Up more than 5% on Thursday, the SPDR Metals & Mining ETF (XME | Quote | Chart | News | PowerRating) still is significantly off its highs after plunging for six out of the previous seven days going into Thursday's bounce.
Today's report includes three exchange-traded funds. All three have ETF PowerRatings of 9 and all three represent the equity markets of countries such as South Africa, Russia and Austria. Traders who feel as if they missed their opportunity to buy high ETF PowerRatings funds earlier in the week may have a second bite of the apple in the form of these three, 9-rated ETFs.
David Penn is Editor in Chief at TradingMarkets.com.
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