High Probability ETF Trading: 7 ETFs You Need to Know for Wednesday (EWZ, TIP, OIH, EWS, XRT, ILF, IAU)

Overbought conditions continue to characterize the exchange-traded fund (ETF) market at midweek. Even as yesterday’s late reversal helped moderate overbought conditions, traders will still find a large number of markets that are overdue for a pullback, statistically speaking.

Among the more overbought sectors traders should be aware of is homebuilding and real estate, with ETFs like the ^VNQ^ and the ^ITB^ most representative of the group.

Here are 7 ETFs You Need to Know for Wednesday.

With the U.S. markets in particular continuing to remain strong, bond funds like the ^TIP^ are among the most oversold heading into trading on Wednesday.

The most oversold country fund in our database is the ^EWZ^ (below).

EWZ chart

Shares of EWZ were little changed on Monday, but sellers arrived in earnest in Tuesday’s trading, taking the ETF down by more than 1%.

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In our most recent 7 Stocks You Need to Know, we hinted at the possibility of profit-taking in the very overbought energy space. Today we note that the  ^OIH^ have pulled back into oversold territory above the 200-day moving average.

A number of exchange-traded funds have retreated near to, but not yet within, oversold territory as of midweek. These ETFs include a pair of country/regional ETFs: the ^EWS^ and the ^ILF^ (below).

ILF chart

The pullback in ILF comes after four consecutive higher closes.

Also pulling back toward oversold levels above the 200-day are gold-related ETFs. In addition to some of the funds mentioned in recent 7 ETFs You Need to Know, the ^IAU^ (below) has retreated toward oversold territory ahead of Wednesday’s open.

IAU chart

Shares of IAU have closed at their most oversold since shortly after the Thanksgiving holiday.

Closing lower after a volatile session on Tuesday, shares of the ^XRT^ ended the day at their lows, reflecting the continued possibility of profit-taking in the sector.

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David Penn is Editor in Chief of TradingMarkets.com