High Probability ETF Trading Report: Country ETFs You Need to Know
When it comes to high probability trading, our research has revealed that country ETFs – exchange-traded funds that track the national stock markets of countries from Brazil and China to Germany and India – are some of the best ETFs for high probability traders to study, follow and trade.
Why is this so? We have found that country ETFs – compared to other types of ETFs like sector ETFs and commodity ETFs – do a much more consistent job of moving from overbought to oversold extremes. Our approach to high probability ETF trading is based on buying ETFs that are experiencing short term oversold extremes and selling short ETFs that have reached short term overbought extremes. As such, country ETFs tend to be near the top of the list in terms of potential trading candidates.
What are some of the more oversold country ETFs here at mid-week, with the markets seeming to take a pause after the run-up in equities last week. Although none have actually moved officially into oversold territory, here are some exchange-traded funds that have begun to show the sort of weakness above the 200-day that high probability traders want to keep an eye out for over the next few days.
As of Tuesday’s close, the most oversold single country ETF was the iShares MSCI Brazil Index ETF
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EWZ |
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After gapping higher and closing lower on Monday, shares of EWZ slid by well over 1% on Tuesday. This move more than cut the ETF’s 2-period RSI in half and, with further weakness on Wednesday, likely will move the ETF even closer to the “consider buying” range for high probability ETF traders.
Next in line is the iShares MSCI Malaysia Index ETF
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EWM |
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Less widely-traded than the Brazil ETF, the EWM is nonetheless among the more oversold country ETFs trading above the 200-day. Also down for two days in a row, EWM has a 2-period RSI of just under 38 as of Tuesday’s close. As with EWZ, additional selling will probably find the ETF officially in oversold territory.
The last ETF in today’s report is the iShares MSCI Mexico Index ETF
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EWW |
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PowerRating). This fund has also closed lower for two days in a row and is poised to move lower again today on Wednesday.
With a 2-period RSI in the 40s, EWW arguably may be more of a neutral ETF than one that is on the verge of entering oversold territory above the 200-day. However the growing likelihood of a third consecutive down close above the 200-day and the fact that EWW’s 2-period RSI has slipped to less than 25 intraday bode well for the ETFs chances of making some high probability traders’ watch list before the day is through.
Join Larry Connors live, Wednesday at 4:30 pm for a special presentation for our upcoming Swing Trading College. The Swing Trading College remains our number one, most popular course and this is the seventh time we’ve offered it. The class runs 14 weeks and covers short term trading of stocks, ETFs (3 weeks of ETFs), options, e-minis’ and building a full trading plan – along with 4 weeks of live trading.
In this class Larry will be also introducing for the first time a new high probability stock trading strategy, along with trading additional strategies to trade ETFs including Leveraged ETFs.
If you’d like to attend the presentation, you can register here.
David Penn is Editor in Chief at TradingMarkets.com.