High Probability ETF Trading: 7 ETFs You Need to Know for Monday (FAZ, SDS, XLE, EWZ, SPY, QQQQ, INP)

Oversold conditions are likely to greet traders and investors when trading begins on Monday. Strong selling in a variety of sectors, including new profit-taking in the energy sector, are greating widespread weakness in exchange-traded funds trading above the 200-day moving average.

Note that as the marjor markets move down, inverse leveraged ETFs have been advancing, and represent some of the bigger, short term gainers over the past few days, as noted below.

Here are 7 ETFs You Need to Know for Monday.

Selling in the major equity indexes has meant gains in a variety of inverse leveraged exchange-traded funds that move up when the major indexes move down. Among these inverse leveraged ETFs making gains over the past few days are funds like the ^FAZ^ and the ^SDS^.

Which exchange-traded funds are most likely to enter oversold territory above the 200-day moving average should selling dominate trading on Monday? Closing near oversold levels on Friday were shares of the ^XOP^ and the ^XLE^ (below)

XLE Chart

XLE closed higher for eight out of the previous nine trading days before pulling back on Friday. Additional selling in this ETF likely will put the fund in oversold territory by mid-week.

If you like trading ETFs, then you’ll love The Machine Lite. Click here now to save your spot at the upcoming free webinar this Wednesday led by TradingMarkets founder and CEO Larry Connors on How to Harness the Power of The Machine Using The Machine Lite.

Bond funds are among the most oversold ETFs by asset type in our database. This includes exchange-traded funds like the ^LQD^, which has closed lower for four days in a row leading into Monday’s trading.

The most oversold country fund right now is the ^EWZ^ (below).

EWZ Chart

EWZ has closed lower above the 200-day for the past six consecutive trading days. Of these last six closes, the last four have been in oversold territory.

Both the ^SPY^ and the ^QQQQ^ have pulled back to oversold territory above the 200-day moving average. The SPY has closed lower for four out of the past five trading days, while the QQQQ have closed down for four straight.

ETFs based on the stock markets of India have been among those pulling back in recent days. Pulling back ahead of Monday’s open is the ^INP^ (below).

INP Chart

INP has closed down for five days in a row, shortly after making new highs earlier in the month. INP was near these levels of oversold just recently, in late October, during a pullback that preceded the ETF’s end of month rally from near $77 to north of $83.

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 at TradingMarkets.com.