High Probability Trading Report: Advancing Asia, Real Estate in Retreat

In my last High Probability Trading Report, I highlighted a number of potential opportunities in country funds, particularly those representing markets in Asia such as Malaysia and South Korea. Consider the advance in the ^EWY^.

EWY Chart

For today – and for the next few days – high probability traders should consider potential new opportunities in a variety of areas, including real estate, which pulled back significantly on Thursday.


First, on the stocks front, continued overbought conditions have reduced the number of high probability opportunities for stock traders. Among the few oversold stocks trading above their 200-day moving averages for Friday are ^AET^.

AET Chart

The pullback in AET is representative of growing distribution in the health care sector. Other big name stocks on the move lower in recent days that fall into this category include ^BMY^ and ^UNH^.

Exchange-traded Funds (ETFs):

As I noted in the stock section, many of the most significant pullbacks presently are in health care. This is apparent in the ETF market by the oversold conditions in exchange-traded funds like the ^PPH^ and the ^XLV^ (below).

XLV Chart

In addition to the retreat in health care exchange-traded funds, we are also picking up a number of pullbacks in real estate related ETFs. Among the funds in this group are ETFs like the ^RWR^ and the ^VNQ^ (below).

VNQ Chart

Leveraged ETFs:

The persistence of overbought conditions has been nowhere more visible and impacting for high probability traders than in the market for leveraged ETFs. As market ramp higher and higher, inverse leveraged ETFs in particular have moved deeper toward or into oversold territory.

Among the more oversold inverse leveraged ETFs that are increasingly vulnerable to reversal back to the upside in the short term is the ^TYP^ (below).

TYP Chart

TYP has closed in extreme oversold territory (extreme for leveraged ETFs, that is) for the past two consecutive trading days. Although the fund has been trending lower for several days, TYP has only recently reached levels extreme enough to the downside to bring the fund to the attention of high probability traders.

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David Penn is Editor in Chief at TradingMarkets.com.