High Probability ETF Trading: 7 ETFs You Need to Know for Friday (OIL, USO, PPH, XLV, RKH, XLF, UYG)

Both the ^SPY^ and the ^QQQQ^ continue to pullback into oversold territory above the 200-day moving average. Continued weakness in these funds almost certainly will make them targets for high probability traders in the new year.

Among the most oversold sectors heading into Friday’s trading are oil commodity funds (though not necessarily energy stocks), health care and pharmaceuticals, and financials.

Here are 7 ETFs You Need to Know for Friday.

Closing lower for the past two days in a row – and three out of the past four trading sessions – were oil commodity-based exchange-traded funds like the  ^OIL^ and the ^USO^ (below).

USO chart

Shares of USO have been largely rangebound since rallying back above their 200-day moving average in late November. The current pullback represents the ETF’s most oversold status since then.

Drugs/pharmaceuticals and health care are also among those sectors that have become oversold above the 200-day in recent days. This includes funds like the ^PPH^ and the ^XLV^ (below).

XLV chart

XLV closed in oversold territory on Thursday and is moving lower again in trading on Friday.

Sellers have been taking profits in the financial sector, with exchange-traded funds like the ^RKH^ and the ^XLF^ (below).

XLF chart

Down two days in a row heading into trading on Friday, the XLF has been trading above its 200-day moving average since early December.

Pulling back into oversold territory early in trading on Friday was the ^UYG^. Any significant selling in the fund likely will make for an oversold close in this leveraged exchange-traded fund.

With 7 professional, quantified trading strategies for trading both bull and bear markets, High Probability ETF Trading by Larry Connors and Cesar Alvarez was voted one of the top 10 trading books of 2009 by SFO Magazine. Click here to find out why.

David Penn is Editor in Chief of TradingMarkets.com