High Probability ETF Strategies: Pullbacks in Health Care and Asia
Even with the S&P Depositary Receipts ETF
(
SPY |
Quote |
Chart |
News |
PowerRating) up for four out of the past five days and deeply into overbought territory – and seven in a row in overbought territory above the 200-day, our high probability strategies for trading ETFs continue to uncover potential opportunities for short-term traders looking to buy weakness and sell strength.
As of the Tuesday close, most of those opportunities were a smattering of country ETFs, sector ETFs, and a number of commodity funds that are all trading above their 200-day moving averages, but have pulled back significantly in recent days.
Among country and equity index ETFs, the pullbacks in both the iShares MSCI Japan Index ETF
(
EWJ |
Quote |
Chart |
News |
PowerRating) and the iShares MSCI Singapore Index ETF
(
EWS |
Quote |
Chart |
News |
PowerRating) were the most noteworthy. So far in trading on Monday, buyers have begun to return to EWS, while EWJ remains under selling pressure and may represent the better pullback opportunity of the two in the near term.
Sellers have also been busy in the consumer stock sector, with pullbacks in both consumer staples stocks, represented by the Consumer Staples Select Sector SPDR ETF
(
XLP |
Quote |
Chart |
News |
PowerRating), and retail stocks, represented by the Retail HOLDRS ETF
(
RTH |
Quote |
Chart |
News |
PowerRating).
Of the two, XLP may be the one for high probability traders to focus on. This is because while the early Wednesday bounce in RTH has been mild so far, the Consumer Staples Select Sector SPDR ETF is actually still very much in pullback mode, moving lower again in the first few hours of trading on Wednesday.
Note also that XLP has two out of the past three trading days.
Lastly, with the health care debate remaining the top political topic of the day, should there be any surprise that we are seeing an uptick in volatility in health care stocks – as represented by the Health Care Select Sector SPDR ETF
(
XLV |
Quote |
Chart |
News |
PowerRating)?
After advancing for four days going into Tuesday’s trading, XLV sold off – and is continuing lower early on Wednesday. Whether or not the selling in XLV is related to the latest twists and turns of the health care debate is anybody’s guess. But what is not guesswork is the fact that XLV is becoming increasingly oversold in the short term and, according to our research, may represent an opportunity for high probability ETF traders should this weakness continue.
Are you interested in trading ETFs like SPY, EWJ, and XLV? With High Probability ETF Software, traders get daily trading signals based on the 7 ETF trading strategies from Larry Connors’ new book, High Probability ETF Trading.
Click here to start your free trial to High Probability ETF Software today!.
David Penn is Editor in Chief at TradingMarkets.com.