If you miss the days of worrying about Europe …
Country funds from The Continent aren’t the only ones retreating to short-term oversold territory. But with so much focus on Asia, the recent pullbacks in funds representing national stock markets in the United Kingdom, France and Europe in general have gone overlooked.
This could be a mistake for traders and active investors looking to buy weakness and sell strength in bull markets. Here are a trio of exchange-traded funds that high probability traders will be watching as they move lower above the 200-day moving average.
Two consecutive lower closes have taken the iShares MSCI United Kingdom Index Fund ETF (NYSE: EWU) from short-term overbought territory to short-term oversold above the 200-day moving average. Trading at new, six-month highs at the beginning of the month, EWU is pulling back to significant, short-term lows for the second time since the fund climbed back into bull market territory in late January.
That previous pullback had EWU closing lower for three days in a row, twice in technically oversold territory, before buyers swooped in, bidding the stock higher by more than 4% over the next five days.
Heading into trading on Thursday, EWU has a positive, short-term edge of just over one percent. The ETF also earned a one-point ratings upgrade to a neutral, 6 out of 10 midway through the session.
Comparable edges and short-term ratings are present in the iShares MSCI France Index Fund ETF (NYSE: EWQ), as well. With a positive edge of more than three-quarters of a percent in the short-term and neutral ratings, EWQ has pulled back by just under one percent in Wednesday’s trading to finish at new, two-week lows. Note that EWQ has only been trading above its 200-day moving average since the beginning of March.
Traders wanting a broader, more diverse exposure to European equities may want to consider the pullback in the Vanguard European ETF (NYSE: VGK).
Like EWQ, VGK has traded in bull market territory on a consistent basis only since the first days of March. But in that time, VGK has already tested the willingness of buyers to take advantage of short-term oversold conditions. A three-day sell-off in the ETF shortly after mid-month, took VGK into oversold territory for two days in a row before the fund reversed course, bounding higher by more than two and a half percent in two days.
VGK sold off by 1% in Wednesday’s trading, and has a positive edge of just under that amount. VGK shares neutral ratings with both EWQ and EWU.
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David Penn is Editor in Chief of TradingMarkets.com