High Probability ETF Trading: 7 ETFs You Need to Know for Wednesday (SPY, XLY, IYZ, IYR, URE, EPI, QID)

ETF markets rallied on Tuesday, setting up potentially overbought conditions when trading begins on Wednesday. ^QQQQ^, for example, has closed in overbought territory for the past seven consecutive trading days.

Country funds were especially strong performers heading into Wednesday, with the ^FXI^ up more than 1% after a three-day pullback and the ^EWZ^ rallying more than 2% after a pullback of four days.

Here are 7 ETFs You Need to Know for Wednesday.

Shares of the ^SPY^ rallied to close above their 5-day moving average on Tuesday after a three-day pullback that took the ETF into oversold territory.

Among the few newly oversold exchange-traded funds heading into Wednesday’s trading is the ^XLY^ (below).

XLY chart

The XLY has closed lower for four consecutive trading days.

Representative of the big sell-off in telecommunications stocks, the ^IYZ^ (below) has become the most oversold sector fund in our database of ETFs.

IYZ chart

Down four days in a row, three of the last four closes in the exchange-traded fund have been in oversold territory above the 200-day moving average.

Real estate-related ETFs have also become increasingly oversold in recent days. This includes funds like the ^IYR^ as well as leveraged alternatives like the ^URE^.

Markets in India have begun to strengthen after major pullbacks. Typical of this strength was the higher close in the ^EPI^ (below) which had closed lower for five consecutive trading days heading into Tuesday’s trading.

EPI chart

Four of those five lower closes in EPI were in oversold territory above the 200-day moving average.

With a 2-period RSI of less than 2, the ^QID^ is the most oversold exchange-traded fund in our database. QID is leveraged two-to-one to the daily performance of the Nasdaq 100 Index.

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