High Probability ETF Trading Report: Oversold Health Care, Small Caps and Emerging Markets
Stocks had been moving in a tight trading range for the past several days, but with the pre-market futures indicating the return of aggressive selling, a resolution to the low volatility of that trading range may be at hand.
Going into Monday, some of the more oversold ETFs that high probability ETF traders have been focusing on have included ETFs representing a fairly wide variety of markets. These include ETFs representing sectors — such as consumer staples, utilities or health care — such as the Health Care Select Sector SPDR ETF
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Sector ETFs, according to our research, do a good job of reverting to the mean compared to other ETFs such as commodity ETFs. As such, they can be an excellent choice for high probability ETF traders looking for oversold markets.
That said, some of the best ETFs for high probability ETF traders are not commodity or sector ETFs, but country and equity index ETFs. We have found by looking at hundreds of simulated ETF trades since inception that those ETFs that move most reliably and consistently between oversold and overbought extremes are country and equity index ETFs. These are the ETFs that we look for first, when it comes to selecting the right ETFs to trade every day.
With this in mind, there are two exchange-traded funds that high probability ETF traders should consider adding to their watchlists. The first is the iShares MSCI Emerging Markets Index ETF
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This ETF slid into oversold territory on Friday and is continuing to move lower early on Monday. The fund includes stocks from countries such as Brazil, China and Russia and by industry sector consists largely of both financial and industrial equities.
Last, let’s take a look at an equity index ETF that has also become oversold in recent days — the ProShares Ultra Russell 2000 ETF
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Traders should be careful when trading leveraged ETFs like the UWM (and if you don’t know how to trade leveraged ETFs then Larry Connors’ Swing Trading College presentation Monday at 1 p.m. is for you! Click here), which is leveraged 200% to the daily return of the Russell 2000 Index. But there is no doubt that the ETF has become oversold as of the Friday decline and is looking to become even more oversold in Monday’s selling.
Join Larry Connors live, Monday at 1 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.
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