Though they do not have Power Gauge Ratings, you can use the technical analytics on Chaikin charts to effectively identify strong and weak ETFs.
The same technical criteria which make a stock a “Classic Bull” work for ETFs as well:
- Price is above a rising long-term trend
- Strong Chaikin Money Flow
- Strong Relative Strength
The above chart of the SPDR Industrial Sector ETF (Symbol: XLI), shows these criteria all through 2013, along with Relative Strength Buy Signals which identifed key entry points.
When the ETF broke down below its long-term trend in January 2014, this indicated a potential change in its overall Bullish orientation.
The following chart shows the opposite for the PowerShares DB Commodity Index (DBC):
- Price below a falling long-term trend
- Weak Chaikin Money Flow
- Weak Relative Strength
Differences between Stocks and ETFs
ETFs do not have a Power Gauge Rating and do not trigger Signals which require a Power Gauge Rating.
Use Relative Strength Buy/Sell and Relative Strength Breakout/Breakdown Signals, which look for significant patterns in an ETF’s momentum relative to the market, to identify lower-risk entry and exit points.