High Probability ETF Trading: 7 ETFs You Need to Know for Monday (EWH, EWZ, DIA, RWR, IYR, FAS, ROM)

A strong end of week sell-off turned a number of exchange-traded funds from overbought to oversold in a single session. In many cases, this has allowed traders take initial positions in ETFs that were already very oversold. Should the intensity of Friday’s selling return on Monday, traders will need to be wary of chasing oversold ETFs below their 200-day moving average.

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Here are 7 ETFs You Need to Know for Monday.

Two of the most oversold exchange-traded funds trading above the 200-day moving average going into trading on Monday are country funds: the  ^EWH^ and the ^EWZ^ (below).

EWZ chart

Shares of EWZ have closed lower for two days in a row, with both closes in oversold territory. After a pullback of more than 2% on Friday, the fund is trading just above its 200-day moving average.

Among U.S. equity index ETFs, the ^DIA^ is the most oversold. The ETF was in overbought territory above the 200-day moving average with a 2-period RSI of more than 90 on Thursday. By Friday’s close, DIA was deeply in oversold territory above the 200-day, with a 2-period RSI in the single digits.

Trading just outside of oversold territory above the 200-day are a number of real estate and REIT related ETFs. This includes funds like the ^RWR^ and the ^IYR^ (below).

IYR chart

Shares of IYR pulled back by more than 1% on Friday after rallying for five consecutive trading days and becoming increasingly overbought.

Selling in financial stocks helped the ^FAS^ pull back by more than 5% in trading on Friday. FAS has been rangebound for most of January, with Friday’s sell-off taking the fund to the lowermost end of that month-long range.

A four-day rally into overbought territory above the 200-day moving average was enough to bring out the profit-takers in the ^ROM^ (below) on Friday.

ROM chart

The pullback of more than 4% in ROM takes the fund back to oversold territory, territory the leveraged ETF had been trading in only a week ago.

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David Penn is Editor in Chief of TradingMarkets.com