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You are here: Home / ETFs / Commentary / High Probability Trading Report: Country Funds, the QQQQs and Other Pullbacks Above the 200-Day

High Probability Trading Report: Country Funds, the QQQQs and Other Pullbacks Above the 200-Day

June 23, 2010 by David Penn

Recent strength and Tuesday’s sharp reversal have combined to create a little more than a handful of exchange-traded funds (ETFs) trading in oversold territory above the 200-day moving average heading into Wednesday’s trading.

High probability, data-driven trading means taking trades wherever the edges appear. Are we in a bull market? Are we in a bear market? These are secondary concerns to the high probability trader. Instead, the focus is on specifics: what markets are oversold above the 200-day moving average? What markets are overbought below the 200-day moving average?

For today, I want to focus on some of those markets that are oversold above the 200-day. These ETF markets include country funds and sector ETFs, as well. There are even a few leveraged ETFs that have become oversold above the 200-day moving average that high probability traders may want to keep an eye on.

^EWC^

Closing lower for two days in a row and dropping sharply on Wednesday in the first hours of trading, EWC (below) is among the more oversold country funds trading above the 200-day moving average.

EWC Chart

The last time EWC was this oversold was in late May, shortly after the fund slipped below the 200-day moving average. From that oversold low, EWC rallied well over 4% over the next five days.

^QLD^

For traders who like to trade leveraged ETFs, the pullback in the QLD may provide an opportunity to scale-in over the next few days.

QLD Chart

The QLD was last at these oversold extremes in early June, shortly before going on a streak of seven consecutive higher closes leading into the end of last week. As with all of the exchange-traded funds in today’s report, traders should avoid buying or scaling in to these funds if they close below the 200-day moving average.

^XLI^

I mentioned above that there were sector ETFs pulling back into oversold territory above the 200-day moving average. In addition to funds like the ^IYT^ and the ^KRE^, the ^XLI^ is among those sector funds that traders may want to consider on continued weakness above the 200-day moving average.

XLI Chart

XLI moved from overbought territory on Monday to oversold territory on Tuesday. Again, should the fund remain above the 200-day, the fund will likely be a target for many high probability traders over the next few days.

With Larry Connors’ High Probability ETF Trading Software, short term traders have access to the same kind of “buy the selling, sell the buying” trading strategies that professional traders have used successfully for decades.

Click here to start your free trial to Larry Connors’ High Probability ETF Trading Software today!

David Penn is Editor in Chief at TradingMarkets.com.

Filed Under: Commentary, Recent Tagged With: country funds, etf funds, ETF Trading, High Probability Trading, short term trading strategies, trading ETFs

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