High Probability ETF Trading: 7 ETFs You Need to Know for Tuesday (RTH, XRT, XLY, JNK, HYG, SMH, IYT)

Relatively mild trading on Monday masked some potentially significant differentiation among the major equity index ETFs. As such, the ^SPY^ will open overbought on Tuesday, while the ^QQQQ^ has pulled back into decidely neutral territory above the 200-day moving average.

Here are 7 ETFs You Need to Know for Tuesday.

Profit-taking in retail has helped popular retail ETFs pull back into oversold territory going into trading on Tuesday. These funds include the ^RTH^ and the ^XRT^ (below)

XRT chart

XRT’s Monday close was the lowest in the ETF all month. The fund’s December oversold low was back on the eighth.

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Also representative of the selling in retail stocks was the mild pullback in the ^XLY^. Although the fund pulled back less than half a percent on Monday, XLY is likely to slip into oversold territory should the selling follow-through for a second day.

High yield debt continued to trade in oversold territory above the 200-day. Closing lower for a third day in a row was the ^JNK^, while the ^HYG^ (below) has closed down for three out of the past four trading days.

HYG chart

Shares of HYG closed on Monday at their most oversold level since mid-November.

Sellers may be emerging in the technology sector, as well. PUlling back into oversold territory above the 200-day ahead of Tuesday’s open were shares of the ^SMH^ (below).

SMH chart

Shares of SMH have closed lower for two days in a row. The fund’s two-day pullback comes just after the ETF had reached a new year-to-date high for 2010.

The ^IYT^ is another exchange-traded fund that began to pull back modestly on Monday. Additional selling here could put the ETF in oversold territory above the 200-day by midweek.

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David Penn is the Editor in Chief of TradingMarkets.com