High Probability ETF Trading Report: Bonds Up, Country Funds Down
Going into trading on Thursday, there is a better chance than we’ve seen in recent days that we may get a significant pullback. This is based on the overnight trading in Asia, for example, which took markets lower in advance of Thursday’s open in the U.S.
Before looking at potential opportunities that a significant pullback may provide, I want to look at some of the markets that have been oversold in recent days and have rallied into strength – providing opportunities for high probability ETF traders to lock in gains in a variety of exchange-traded funds.
I have highlighted high yield bond ETFs in recent days, since the High Probability ETF Trading Report from a week ago when I encouraged traders to take a look at junk bond ETFs like the ^JNK^ and the ^HYG^ (below).
Not only high yield bond ETFs, but also investment grade corporates have been advancing from recent oversold lows. Consider the recent trading in the ^LQD^.
Indeed, some of the early selling in these funds as trading begins on Thursday is likely profit-taking by traders who picked up shares of these ETFs days ago when they were significantly lower.
In terms of potential new opportunities, the universe of country-based ETFs may have more worthwhile funds to watch than we’ve seen in several days.
Among these country exchange-traded funds is the ^EWG^.
EWG pulled back into oversold territory above the 200-day moving average on Wednesday and is moving lower again on Thursday.
Other country-based exchange-traded funds that potentially fall into this category are the ^DIA^, the ^EWZ^, and the ^EFA^.
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David Penn is Editor in Chief at TradingMarkets.com.