High Probability ETF Trading: 7 ETFs You Need to Know for Tuesday (EWJ, EWA, XRT, RTH, IYE, VDE, SPY)
Stocks finished lower for a second day ahead of trading on Tuesday. The pullback was led by technology, especially selling in the semiconductor sector. The ^SMH^, for example, lost well over 2% on Monday for its second consecutive lower close, and is back in oversold territory above the 200-day moving average.
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Traders will see significant oversold conditions in most markets when trading begins on Tuesday. But if there is more selling to come, traders may want to turn their attention to the energy patch, where a number of ETFs have begun to pullback but have not yet become technically oversold.
Here are 7 ETFs You Need to Know for Tuesday.
Two of the most oversold exchange-traded funds (ETFs) heading into trading on Tuesday are country funds: the ^EWJ^ and the ^EWA^.
Shares of EWJ pulled back by almost 2% on Monday to close lower for a second session in a row. The EWA also pulled back by more than 1% in Monday’s trading, the fund’s second consecutive lower close.
The consumer discretionary sector has also come under some significant selling in recent days. This has meant lower levels – and oversold conditions – for retail exchange-traded funds like the ^XRT^ and the ^RTH^ (below).
Down two days in a row, the RTH has been rangebound for the past week and a half. Monday’s pullback took the fund to the lowermost end of that range.
Looking for funds that have not pulled back into oversold territory but could on any significant follow-through selling on Tuesday? Energy ETFs have become increasingly oversold, and two – the ^IYE^ and the ^VDE^ (below) – may be among the next funds to slide into oversold territory.
VDE has pulled back for a second day in a row heading into trading on Tuesday, and is down three of the past five sessions.
All of the major U.S. equity index ETFs have retreated into oversold territory ahead of Tuesday’s open. This includes the ^SPY^ (below).
The SPY has closed lower for two days in a row, the last session in oversold territory, and has been down for three out of the past five trading days.
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David Penn is Editor in Chief of TradingMarkets.com