High Probability ETF Trading Report: Down Days for Short Term Gains
When it come to high probability ETF trading, there are a number of approaches that short term traders can take to find those ETFs that are most likely to outperform in the short term.
Remember, what we are looking for as high probability ETF traders looking to buy ETFs on pullback is evidence of exceptionally oversold conditions above the 200-day moving average. To do this, one of our more effective and popular tools is the 2-period RSI. We use the 2-period RSI as a tool both for determining entries into high probability ETF trades, as well as exits: buying ETFs when their 2-period RSI is exceptionally low and selling ETFs when their 2-period RSI is exceptionally high.
But there are other ways that short term traders can spot oversold ETFs that are pulling back and potentially poised to move dramatically higher. One of these ways is the remarkably simple approach of looking for multiple consecutive down days.
SPDR S&P 500 ETF
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As Larry Connors and Cesar Alvarez point out in their new book, High Probability ETF Trading, ETFs that move lower day after day after day can be potentially profitable trades when these ETFs are pulling back above the 200-day. These days of consecutive selling are another sign that an ETF is dominated by sellers — too many sellers, in fact, who have managed to drive the ETF down into extreme oversold territory. This is precisely when high probability traders look to strike: buying the selling and picking up shares of undervalued ETFs — many of which were at new short term highs only a few days or few weeks before.
Consumer Discretionary Select Sector SPDR ETF
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High probability ETF Trading: Buying the selling and selling the buying in oversold and overbought ETFs.
Throughout today’s report I have posted charts of some of the exchange-traded funds that, as of Wednesday’s close, were displaying the kind of multiple down days that high probability ETF traders look for. Continued weakness above the 200-day moving average in these funds will likely bring even more short term traders off the sidelines and into the market.
ProShares Ultra Financials ETF
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Join Larry Connors live, Tuesday, September 8 at 2 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’s 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.