High Probability ETF Trading: 7 ETFs You Need to Know for Tuesday (PBW, EWY, EWM, QQQQ, GDX, FAZ, TZA)

U.S. equity ETF markets continued to advance on Monday, setting up overbought conditions in a number of major, widely-traded exchange-traded funds including funds like the ^IWM^.

Note that heading into trading on Tuesday, there are no exchange-traded funds (ETFs) in oversold territory in our database. Historically speaking, this is not a sustainable situtation and suggests that a significant pullback may arrive in the near term.

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Here are 7 ETFs You Need to Know for Tuesday.

With no exchange-traded funds in oversold territory as trading begins on Tuesday, those ETF markets that could potentially wind up oversold with only a minimum of selling include ETFs like the ^PBW^. PBW reversed back to the downside after a brief two-day rally.

Among country funds trading just outside over oversold territory, there are two that high probability ETF traders should keep on their radar: the  ^EWY^ and the ^EWM^ (below).

EWM chart

Shares of EWM have closed lower for two out of the past three trading sessions, and three of the past five.

The follow-through from the recent, broadbased oversold bounce has pushed a number of major exchange-traded funds back into overbought territory above the 200-day. This includes funds like the ^QQQQ^ (below)

QQQQ chart

and the ^GDX^ (below).

GDX chart

GDX has closed higher for two days in a row, with the most recent close in overbought territory above the 200-day.

Traders looking for markets that are pulling back may want to turn their attention to the inverse leveraged ETF market where ETFs like the ^FAZ^ and the ^TZA^. FAZ has closed lower for two days in a row, while TZA has closed lower for three.

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