3 Oversold ETFs for Short-Term Traders

It may be hard to find a more diverse set of exchange-traded funds topping our “Most Short-Term Oversold List” than the trio highlighted today.

And there’s no fudging, either. Not only are all three of the ETFs in today’s report trading in oversold territory, but all three are trading at extremely oversold levels with 2-period RSI values in the single digits.

The most oversold ETF in our database, and the first we’ll take a look at today, is the Market Vectors Semiconductors ETF (NYSE: SMH). Shares of SMH have pulled back for five days in a row, the last four in technically oversold territory. Down another 1% in Tuesday’s trading, SMH has the benefit of trading above its 200-day moving average – something that cannot be said for one of the less widely traded semiconductor tracking ETFs: the S&P Semiconductor SPDRS ETF (NYSE: XSD).

Traders interested in the oversold conditions in the semiconductor sector may be equally interested in the pullback in the 2-to-1 leveraged, ProShares Ultra Semiconductor ETF (NYSE: USD). The ETF is nearly as short-term oversold as its non-leveraged colleagues, presenting a potential opportunity for short-term traders and active investors to maximize gains while minimizing overall market exposure.

From the world of silicon to the world of chemicals, gold, and steel, oversold conditions are as prevalent among basic materials stocks as they are among semiconductors. Down five in a row ahead of trading on Wednesday, the Select Sector Materials SPDRS ETF (NYSE: XLB) has closed in oversold territory for back to back sessions. Selling in the fund has earned XLB a “consider buying” rating of 9 out of 10, and a positive edge in the short-term of more than 1%.

Some of the major holdings in XLB include DuPont (NYSE: DD), Monsanto (NYSE: MON), and Freeport McMoran Copper & Gold (NYSE: FCX). Of the three, only shares of DuPont were trading higher on Tuesday. Monsanto has closed lower for two days in a row to finish just outside of oversold territory with a positive edge of less than half a percent. Shares of FCX continue to toil beneath their 200-day moving average, having not traded in bull market territory since late February.

The last ETF in today’s report shows selling in the retail sector. The S&P Retail SPDRS ETF (NYSE: XRT) has closed lower for four out of five trading days after closing lower by nearly one and a half percent on Tuesday. Bringing about XRT’s second oversold finish in a row, Tuesday’s selling has earned the fund both a two-point, intraday ratings upgrade to a “consider buying” 8 out of 10, as well as a positive edge in the short-term of more than two and a quarter percent.

Note that the current multi-day pullback in XRT is the second such correction in the ETF in less than 30 days. From its move back into bull market territory in December, shares of XRT had not closed lower for three days in a row until the profit-taking in late March that followed the ETF’s rally to new, 52-week highs.

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David Penn is Editor in Chief of TradingMarkets.com