High Probability ETF Trading Report: Rally in Real Estate, Bargains in Bonds
Within the first few minutes of trading on Thursday, U.S. markets are moving dramatically higher. This means that many of the exchange-traded funds that appeared in our TradingMarkets Most Overbought and Oversold ETFs for Today have begun to climb out of oversold territory.
This includes a high number of real estate ETFs such as the ^VNQ^ (below), the ^RWR^ and the ^XHB^. Interestingly, many of these real estate and REIT-related funds only moved into oversold territory late in trading on Wednesday. And from the way things look on Thursday morning, those funds will not be overstaying their welcome among the oversold.
This underscores the value of our Most Overbought and Oversold ETFs for Today column as a tool for high probability trading. Based on the strategies in the best-selling trading book by Larry Connors and Cesar Alvarez, High Probability ETF Trading, those exchange-traded funds that make our Most Overbought and Oversold ETFs for Today roster are ones that have historically tended to rally significantly from short term oversold conditions and to drop from short term overbought conditions.
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With markets moving higher today on Thursday, the number of ETFs that are oversold above the 200-day moving average are few. Intraday, one ETF for high probability traders to keep an eye on may be the ^JNK^. JNK gapped down on Thursday, opening in oversold territory after rallying from intraday lows on Wednesday.
The same can be said for another high yield bond ETF, the ^HYG^.
As with JNK, HYG gapped lower at the open, a gap down that had the fund in oversold territory above the 200-day moving average right after the opening bell.
An aside: Not only are junk bond ETFs adding to the modest ranks of the oversold, but also preferred securities ETFs like the ^PGX^ and the ^PFF^ have continued to experience significant selling pressure over the past few days.
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David Penn is Editor in Chief at TradingMarkets.com.