High Probability ETF Trading: 7 ETFs You Need to Know for Thursday (SPY, IWM, FAS, TYH, SRS, FXY, EWZ)
Despite the aggressive selling in recent days, a number of exchange-traded funds (ETFs) are only just now moving into significantly oversold territory above the 200-day moving average. Many of these exchange-traded funds will be among those targeted by high probability traders over the next few days as trades begin looking among those stocks that have pulled back the most for the potential of a short-term bounce.
Here are 7 ETFs You Need to Know for Thursday.
All of the major U.S. equity index fund ETFs are currently in oversold territory above the 200-day moving average. This includes the ^SPY^ and the ^IWM^ (below).
IWM has closed in oversold territory above the 200-day moving average for three out of the past five trading days.
The strong selling has created a number of potential opportunities in leveraged ETFs. This includes oversold conditions in 2-to-1 exchange-traded funds like the ^QLD^, as well as 3-to-1 leveraged ETFs like the ^FAS^ (below).
Shares of FAS have closed lower for the past three consecutive trading days, and is down for five out of the past six.
Also down three days in a row and back in oversold territory is the ^TYH^.
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Traders looking for opportunities to short the market should keep an eye on those short or inverse funds that have become overbought as the market has moved lower. Examples of these funds include the ^SRS^. SRS has closed higher for three days in a row, the last two in overbought territory below the 200-day moving average.
Concerns over the continuing tragedy in Japan and the need to repatriate yen has helped the ^FXY^ (below) close higher for a fourth day in a row, gaining more than 1% on Wednesday alone.
Buying in the FXY helped the trust rally above its most recent high from November 2010.
Many of the major international funds that attracted traders during the bull market run in emerging markets have begun to trade below their 200-day moving averages. One example of such a fund is the ^EWZ^ which reversed lower to close beneath its 200-day on Wednesday.
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David Penn is Editor in Chief of TradingMarkets.com