High Probability ETF Trading: 7 ETFs You Need to Know for Thursday (RTH, XRT, DIG, EWD, IWM, EWZ, DBA)

Traders are likely to find slightly overbought conditions when trading begins on Thursday. While buyers remained on the offensive in many commodity sectors, such as oil and energy, selling in retail has been strong, sending both retail and consumer discretionary related exchange-traded funds lower and into oversold territory.

Here are 7 ETFs You Need to Know for Thursday.

As noted above, sellers have been especially aggressive in the retail sector, which has helped retail-based exchange-traded funds pull back into oversold territory above the 200-day moving average. Two such ETFs are the ^RTH^ and the ^XRT^ (below).

XRT chart

Shares of XRT pulled back by nearly 2% in trading on Wednesday, closing in oversold territory for the second day out of the past four.

Buyers remain aggressive in energy funds here in the second half of the trading week. Closing higher for a third day in a row and increasingly overbought above the 200-day moving average heading into trading on Thursday is the ^DIG^.

Among country funds, the most oversold ETF is the ^EWD^ (below).

EWD chart

Like the XRT, the Sweden ETF is back in oversold territory above the 200-day moving average. The fund dropped by well over 2% in trading on Wednesday.

After a two-day rally from oversold lows late last week, the ^IWM^ rallied on Wednesday. However, the fund not only failed to hold its highest levels of the session, but also reversed to close near the lows of the day.

Trading just above oversold territory ahead of Thursday’s open are country funds like the ^EWZ^ (below).

EWZ chart

The pullback in EWZ comes just as the fund had closed higher for two days in a row – the last back in overbought territory – following a sharp pullback last Friday.

Concern over worlwide food prices has helped encourage buyers to bid shares of the ^DBA^ higher for a third consecutive trading day.

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