With equity markets continuing to march higher on Thursday, a number of leveraged exchange-traded funds (ETFs) have earned significant Leveraged ETF PowerRatings upgrades going into the final trading day of the week.
Leveraged ETF PowerRatings are a quantified strategy short term traders can use to find the best leveraged ETFs to trade every day. By buying leveraged ETFs after they have earned Leveraged ETF PowerRatings of 9 or 10 and exiting those trades as the ETFs rally into strength, short term traders can trade leveraged ETFs with real, quantified, historical edges on their side.
What kind of historical edges? Our research into leveraged ETFs, going back to inception in a wide variety of leveraged funds, shows that leveraged exchange-traded funds that earn Leveraged ETF PowerRatings of 9 have made significant short term gains nearly 78% of the time. Those leveraged ETFs earning upgrades to our highest rating of 10 fared even better in our backtesting, making significant short term gains 79.5% of the time.
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Among those leveraged funds earning significant Leveraged ETF PowerRatings upgrades late in trading on Thursday were the ProShares UltraShort S&P 500 (SDS) (below) and the Direxion Daily Small Cap Bear 3x Shares (TZA). Both of these leveraged ETFs earning Leveraged ETF PowerRatings upgrades from 5 to 8 intraday on Thursday. Traders looking for potential long opportunities in the current market may want to keep an eye on SDS and TZA for further Leveraged ETF PowerRatings upgrades over the next few days.
Also earning a significant Leveraged ETF PowerRatings upgrade intraday on Thursday were the Direxion Financial Bear 3x Shares (FAZ) (below).
Shares of FAZ were upgraded from 6 to 9, as financial stocks remain among those most under selling pressure in recent days. As with SDS and TZA, additional upgrades will likely put FAZ on the radar of short term traders looking for markets that have fallen to levels from which they have historically advanced.
Other major Leveraged ETF PowerRatings ahead of trading on Friday include three-point upgrades in exchange-traded funds like the ProShares UltraShort MSCI Europe (EPV) and the Direxion Large Cap Bear 3x Shares (BGZ) (below).
Leveraged ETF Trading Tip:
One of the benefits of leveraged ETF trading is that short term traders can use less capital, taking advantage of the 2x or 3x leverage in top-rated exchange-traded funds. So when trading a 2x fund, look to cut your usual position size in half. With 3x exchange-traded funds, a position size that is 1/3 the size you would use with a non-leveraged ETF is an appropriate adjustment.
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David Penn is Editor in Chief at TradingMarkets.com.
