High Probability ETF Trading Report: Pullbacks in Russia, Asia and Latin America
While some of the most visible pullbacks in exchange-traded funds (ETFs) are taking place in the commodity sector, there are a few country ETFs that high probability ETF traders should be keeping an eye on over the next few days.
When it comes to picking ETFs for high probability trades, our research suggests that country and equity index ETFs revert to the mean more reliably than sector ETFs, which in turn move from overbought to oversold extremes more consistently than commodity ETFs.
As such, while there is an abundance of commodity ETFs that have entered oversold territory above the 200-day moving average – ETFs from the Market Vectors Coal ETF
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One example of a country stock on pullback is the iShares MSCI Hong Kong Index ETF
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EWH has closed lower for three days in a row leading into Thursday’s trading. The ETF remained exceptionally weak on Thursday, gaining a single penny after buyers managed to boost the fund off its intraday lows. Within the first few minutes of trading on Friday, EWH has a 2-period RSI of less than 8.
iShares S&P Latin America 40 ETF
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ILF had traded in much the same way as EWH, closing lower to marginally higher over the past four days. The overall effect, as with EWH, had been to create a significantly oversold ETF going into Friday’s trading – though the fund has bounced in early Friday trading.
The last ETF in today’s report is another country ETF that has been pulling back – in large part due to the correction in energy commodities.
The Market Vectors Russia ETF
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In contrast to EWH and ILF, RSX has soared in early trading on Friday. In fact, there is a possibility that the pullback in RSX has already concluded and, given its strong early move on Friday, may be another pullback away from being a high probability ETF trade.
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David Penn is Editor in Chief at TradingMarkets.com.
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