High Probability ETF Trading: 7 ETFs You Need to Know for Monday (EWT, EWP, DIA, IWM, EWZ, FXI, GLD)
Neutral conditions in most equity ETFs – especially in the United States – are what traders are likely to see when the markets open on Monday. Around the world, overbought conditions are increasingly prevalent, with funds representing emerging markets in Latin America and Asia making multiple, consecutive higher highs.
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Traders should also note that many of the most overbought funds in our database are commodity funds such as the ^DBC^ and the ^GSG^. Because of the exceptionally overbought status of these funds, high probability traders may want to consider waiting for a pullback before taking positions in many of these ETFs and ETNs.
Here are 7 ETFs You Need to Know for Monday.
The most overbought ETF in our database heading into Monday’s trading? After a pair of preferred stock funds, the next in line is the iShares MSCI Taiwan Index Fund ETF ^EWT^. Shares of EWT have closed higher for six days in a row, the last five in overbought territory above the 200-day moving average.
One of the only oversold exchange-traded funds (ETFs) in our database is a country fund, the ^EWP^ (below).
Shares of EWP pulled back by more than 1% on Friday. The fund has closed lower for two out of the past four trading days.
Of the major U.S. equity index ETFs, the ^DIA^ is the one that is closest to oversold territory above the 200-day moving average. By contrast, the ^IWM^ is just outside of overbought territory above the 200-day moving average.
Traders continued to bid higher shares of some of the more widely-traded emerging markets ETFs heading into Monday’s trading. Up for a third day in a row and back in overbought territory above the 200-day moving average are both the ^EWZ^ and the ^FXI^ (below).
FXI has been trading around its 200-day moving average, both above and below it, since early February. The ETF has closed above its 200-day for the past three sessions in a row.
Rallying from a two-day pullback that took the fund into oversold territory late last week is the ^GLD^ (below).
Despite the fund’s strength on Friday, GLD remains in neutral territory and could see additional follow-through to the upside in the short term.
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David Penn is Editor in Chief of TradingMarkets.com