3 Country Fund ETFs for Active Investors

As US stocks have gained ground, attention on what’s going on in the stock markets of Europe, Asia, and elsewhere has waned somewhat. And now, with stocks in the US beginning to pullback once again, European stocks aren’t the only ones that have resumed their corrections, leading a broad number of international equity markets to or near technically oversold levels.

The iShares MSCI Mexico Index Fund ETF (NYSE: EWW) pulled back by more than one and three quarters of a percent on Friday, reversing lower and potentially resuming a sell-off that had taken the fund lower for five out of the previous seven trading days. EWW is now trading just inside of technically oversold territory above the 200-day moving average, but has already earned both a positive, short-term edge of 1%, and a “consider buying” rating of 9 out of 10.

Even greater edges are to be found in the pullback in the iShares MSCI Germany Index Fund ETF (NYSE: EWG), which pulled back by more than 3% on the final trading day of the week. The two-day bounce here managed to return the ETF briefly to overbought levels on Thursday. But with short-term traders moving in quickly to take profits and those who had been betting against ETFs like EWG spotting another opportunity to sell short an overbought German ETF, the fund is again trading near, two-week lows and will open oversold when trading begins on Monday.

The selling in the iShares MSCI Japan Index Fund ETF (NYSE: EWJ) has managed to drag the fund into oversold territory. And this retreat, a pullback of 1% on Friday, has earned EWJ a “consider buying” rating of 8 out of 10 ahead of Monday’s open. Shares of EWJ are actually trading nearer to their 200-day moving average than nearby, two-week lows. But any significant selling on Monday could easily take EWJ beyond both milestones.

Although Spain is much in the news when it comes to Europe, the exchange traded fund representing those stocks is now thoroughly under the sway of sellers, who have dominated the iShares MSCI Spain Index Fund ETF (NYSE: EWP) for months. Trading in bear market territory since the summer of 2011, strength in EWP has more often been successfully sold than chased, and weakness, as befitting a bear market ETF, has tended to lead to more weakness.

This is how traders and active investors will find EWP, oversold in bear market territory and plunging to new lows after sellers sent the fund lower by more than three and a half percent on the final trading day of the week. Even special situations traders may want to avoid EWP, despite the increasingly extreme oversold nature of the fund. Short-term weakness in any number of other European ETFs – including EWG above – is more likely to provide the kind of high probability, snapback rallies that short-term traders are looking for.

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David Penn is Editor in Chief of TradingMarkets.com