High Probability Trading and the Telecom Takedown: IYZ, LTL, VZ, T, BCE
With equity index ETFs like the ^SPY^ making new highs, the ranks of the truly oversold have been thin – exceptionally so. Going into Monday’s trading, for example, there are no exchange-traded funds with ETF PowerRatings of 10 and only one, the ^XLU^, with an ETF PowerRating of 9.
But this does not mean that there aren’t markets where sellers are active. Although there are only two ETFs with PowerRatings of 8, one of those two, the ^IYZ^ has shown the sort of weakness that high probability ETF traders should know about.
As of the close on Friday, the IYZ had closed lower for three consecutive trading days, including a final two days that were in oversold territory above the 200-day moving average.
The same can be said for IYZ’s leveraged cousin, the ^LTL^, which also closed in oversold territory above the 200-day moving average on Friday.
Both of these ETFs are becoming increasingly attractive to high probability traders as they become more and more oversold.
Traders more interested in looking at the stock side of the high probability ledger may want to take a look at the charts of some key telecommunications stocks that are pulling back into oversold territory, as well.
These oversold telecommunications stocks include names such as ^T^ and ^BCE^ – which rallied somewhat on Friday. But the most oversold – and the stock with the highest Stock PowerRating – would be ^VZ^ (above).
Verizon has closed in oversold territory above the 200-day moving average for the past three consecutive days. Even after a modest bounce on Friday, the stock remains in oversold territory, with a Stock PowerRating of 7.
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David Penn is Editor in Chief at TradingMarkets.com.