High Probability ETF Trading: 7 ETFs You Need to Know for Tuesday (FXI, EWH, ILF, VEU, IYT, DBA, IWM)

Traders and investors are likely to encounter mildly and moderately overbought markets here in the United States, while a number of ETF markets around the world – in Asia, Latin America and Europe – continue to pull back to or toward oversold levels above the 200-day.

Both commodities and small cap stocks, as noted below, are among the more overbought markets that traders should consider keeping an eye on for potential pullbacks as these markets become increasingly overextended to the upside.

Here are 7 ETFs You Need to Know for Tuesday.

Around the world, a number of country stock markets continue to feel selling pressure. As such, exchange-traded funds representing those national stock markets have become increasingly oversold in recent days. This includes funds like the widely-traded ^FXI^ and the ^EWH^ (below).

EWH chart

Shares of EWH have closed in oversold territory above the 200-day moving average for the past four consecutive trading days.

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Also among those country/regional exchange-traded funds pulling back above the 200-day is the ^ILF^. The fund closed in oversold territory last Wednesday and is back in oversold territory as of Monday’s close.

Near but not quite in oversold territory above the 200-day moving average is the ^VEU^ (below).

VEU chart

Like the iShares S&P Latin America 40 Index Fund ETF above, the VEU closed in oversold territory on Wednesday and has been trading just outside of oversold territory for the past few days.

Down two days in a row, the ^IYT^ is just outside of oversold territory above the 200-day moving average. The ETF has closed lower for five out of the past six trading days.

Where are buyers most heavily concentrated right now? Among the most overbought markets are commodities, especially agricultural commodities as represented by exchange-traded funds like the ^DBA^ (below).

DBA chart

Shares of DBA have closed higher for four days in a row, with the past three closes in overbought territory above the 200-day moving average.

In addition to agricultural commodities, small cap stocks have been in heavy demand for the past few days. This has helped exchange-traded funds like the ^IWM^ close in overbought territory above the 200-day for three days in a row heading into trading on Tuesday.

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David Penn is Editor in Chief of TradingMarkets.com