High Probability ETF Trading: 7 ETFs You Need to Know for Wednesday (IYZ, XLI, FXI, EZA, XRT, QQQQ, QLD)

As trading begins on Wednesday, most of the major equity ETFs have begun to pull back modestly, as overbought conditions continue to tempt traders into taking profits.

Easing out of overbought territory above the 200-day were such funds as the ^SPY^ and the ^IWM^. It will be worth watching to see if any pullback in these ETFs is met by immediate buying on weakness or whether deeper pullbacks will be required before a new wave of buying comes into the market.

Here are ETFs You Need to Know for Wednesday.

Pullbacks in telecommunications stocks from ^VZ^ to ^T^ have helped make the ^IYZ^ the most oversold exchange-traded fund in our database going into trading on Wednesday.

IYZ chart

Trending lower since the first week of January, the IYZ has closed lower for two days in a row with Tuesday’s close in oversold territgory above the 200-day.

Although buyers have been especially aggressive in technology shares, the most overbought ETF in our database is actually the ^XLI^. XLI has closed lower for seven days in a row, with all seven closes in overbought territory above the 200-day moving average.

Among country funds, the ^FXI^ (below) is the most oversold.

FXI chart

Shares of FXI have trended lower for three days in a row. Tuesday’s close puts the fund just inside of oversold territory above the 200-day moving average.

Also closing just inside of oversold territory above the 200-day was the ^EZA^.

Any additional selling in the ^XRT^ (below) will likely put this ETF in oversold territory heading into the second half of the week.

XRT chart

XRT last closed in oversold territory a week ago. The exchange-traded fund has been trending lower since the beginning of January.

Strength in technology stocks continues to make the Nasdaq 100 exceptionally overbought. These overbought conditions have extended to the index’s most-widely traded ETFs: the ^QQQQ^ and the 2-to-1 leveraged  ^QLD^.

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 in TradingMarkets.com