High Probability ETF Trading: 7 ETFs You Need to Know for Monday (SPY, SSO, IYZ, EWS, EWH, XLF, ERY)
Overbought conditions characterize most ETF markets going into the first trading day of the week. Back in overbought territory above the 200-day are such widely-traded funds as the ^QQQQ^ and the ^IWM^, both advancing from two-day pullbacks.
Gold ETFs like the ^GDX^ and the ^GLD^ also made strong recoveries on Friday, with the GDX up more than 1%.
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Here are 7 ETFs You Need to Know for Monday.
Four days after a one-day pullback in to oversold territory, the ^SPY^ closed at its highest levels since the first half of May on Friday. Up more than 1% on the day was the ^SSO^.
Among the most oversold exchange-traded funds (ETFs) trading above the 200-day moving average heading into trading on Monday is the ^IYZ^ (below).
Traders who have been following our 7 Stocks You Need to Know column are well aware of the recent pullbacks in many of the major stocks of the telecom sector such as ^T^ and ^S^. Selling in these stocks has contributed toward a third consecutive lower close in IYZ, which crossed into oversold territory on Friday.
The most oversold country fund in our database is the ^EWS^ (below).
EWS is not in oversold territory. But additional selling such as the ETF experienced last Thursday could begin to pull the ETF back toward levels from which it has historically advanced. EWS was last in oversold territory in late September, shortly before closing higher for seven out of the eight days that followed.
In contrast to EWS, the ^EWH^ is exceptionally overbought as it stretches further and further to the upside. Trading above the 200-day, shares of EWH have closed higher eight consecutive trading days going into trading on Monday.
There are no exchange-traded funds in our database that are overbought below the 200-day moving average. Moving closer to overbought levels, however, are exchange-traded funds like the ^XLF^ (below).
Should traders continue to pursue the fund, it is possible that aggressive buying could send the XLF up above the 200-day in the near-term. XLF has not closed above its 200-day moving average since early August.
Traders interested in leveraged ETFs trading at historic oversold extremes may want to begin looking at funds such as the ^ERY^. Closing lower for three out of the past four trading days, ERY is among the more oversold of the leveraged exchange-traded funds moving toward oversold territory.
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David Penn is Editor in Chief at TradingMarkets.com.