ETF Trading Strategies: Precious Metals Pullbacks
Those of you who have been following our latest column, TradingMarkets Most Overbought and Oversold ETFs for Today, know that there have been precious few oversold ETFs for short term traders to choose from over the last several days.
This has been a function of both the bull market (or bear market rally, if you prefer) and the major decline in short ETFs below their 200-day moving averages. In the past, many of the oversold ETFs we saw came from the ranks of short or inverse ETFs which were moving lower as the broader markets moved higher. But with the vast majority of short ETFs now trading below their 200-day moving averages, traders looking for short-term oversold opportunities in exchange-traded funds have had to look elsewhere.
One of those locations is in the market for precious metals ETFs, a number of which have pulled back toward their 200-day moving averages in recent days, becoming exceptionally oversold in the process.
The iShares Silver Trust ETF
(
SLV |
Quote |
Chart |
News |
PowerRating) is one example of a precious metals ETF that is becoming more and more oversold SLV had a 2-period RSI of less than 26 as of Thursday’s close and intraday on Friday has actually slipped below its 200-day moving average.
Also with a 2-period RSI in the 20s is the SPDRS Gold Shares ETF
(
GLD |
Quote |
Chart |
News |
PowerRating). As with SLV, GLD has been becoming increasingly oversold over the course of the week and intraday on Friday has a 2-period RSI of less than 12.
Similar pullbacks in precious metals ETFs can be seen in the iShares COMEX Gold Trust ETF
(
IAU |
Quote |
Chart |
News |
PowerRating), which is also trading above its 200-day moving average with a 2-period RSI intraday on Friday that is below 14.
Note that all three of the ETFs in today’s report track the actual price of their underlying commodity: gold in the case of both IAU and GLD, silver in the case of SLV, rather than the share prices of gold or silver mining companies.
If you have been looking to add precious metals exposure to your trading – or even investment – portfolio, then instances like these when precious metals ETFs are oversold in the short term can provide excellent entry opportunities.
According to a recent report, eight out of ten securities traded are exchange-traded funds. Want to learn how to trade them? Click here to pre-order High Probability ETF Trading, the first quantified book of trading strategies to improve your ETF trading.
David Penn is Editor in Chief at TradingMarkets.com.