Financials Pullback for Second Session as Earnings Season Begins: 7 ETFs You Need to Know for Monday
With a government shutdown averted and Tax Day ahead, sellers have put an increasing amount of pressure on the market, with ETFs like the ^QQQ^ pulling back for four out of the past five trading days and the ^SPY^ down three out of the past four.
From a sector perspective, the selling has been most persistent in financials, with stocks like ^JPM^ to ^BAC^ closing for two days in a row heading into the new week.
Note that both JPM and Bank of America report quarterly earnings this week: JPM on Wednesday, BAC on Friday.
Here are 7 ETFs You Need to Know for Monday.
Traders looking for pullbacks in exchange-traded funds (ETFs) might begin their search among the many financial and banking funds that have pulled back into oversold territory over the past few days. These ETFs include the ^XLF^ and the ^IYF^ (below).
Both the XLF and the IYF have closed lower for two days in a row and are oversold above their 200-day moving averages.
Although down two days in a row as well, traders looking for opportunities in the ^FAS^ may want to wait for the fund to become more significantly oversold where its historical edges are greater.
When it comes to trading exchange-traded funds, the historical data suggests that equity-based exchange-traded funds revert to their mean more consistently than commodity-based exchange-traded funds.
To find out why this and other quantified facts about exchange-traded funds can make a major difference in your ETF trading, click here to join Larry Connors for his upcoming, free webinar: 14 Weeks to Trading Mastery: The Summer 2011 Swing Trading College.
Up nearly 2% in trading on Friday was the ^EWJ^. The ETF has closed lower for six trading days in a row, crossing below its 200-day moving average, before Friday’s big bounce higher.
Exchange-traded funds based strictly on regional banks have also been among those most aggressively sold in recent days. Closing in oversold territory ahead of trading on Monday was the ^RKH^ (below).
The pullback in RKH puts the fund at its lowest closing level in more than a week.
Although recently oversold semiconductor stocks are back in neutral territory going into Monday’s trading, technology in general is increasingly oversold. The ^XLK^ (below) reversed to close in oversold territory on Friday.
While the ^QLD^ has pulled back for four out of the past five trading days.
The long version of the 3-Day High/Low Method for swing trading exchange-traded funds has been correct on average more than 76% of the time as tested against popular ETFs like the SPY and the QQQ. Find out more in the book by Larry Connors and Cesar Alvarez, High Probability ETF Trading: 7 Professional Strategies to Improve Your ETF Trading – now available in paperback.
David Penn is Editor in Chief of TradingMarkets.com