High Probability Trading Report: Foods, Gold and Greenbacks Oversold Above the 200-Day (SLE, CPB, AAPL, UUP, GLD)
A sizeable number of exchange-traded funds (ETFs) have fallen below their 200-day moving averages in recent days. This includes such widely-traded funds as the
^SPY^, the ^QQQQ^ and the ^IWM^. All of these funds are trading as deeply in oversold territory as they have in a very, very long time. The QQQQ in particular is at historically oversold levels.
The same is true for many popular sector ETFs. The ^XLF^, ^XLE^, and especially the XLK all continue to trade below their 200-day moving averages.
The upshot of all this for high probability traders is that the main focus of trading in the short term is most likely on the short side. While it will take a bounce for high probability
traders to be able to take new positions on the short side, it is just such a bounce that high probability traders must wait for in order to take maximum advantage of the historical edges outlined
in both Short Term Trading Strategies That Work and High Probability ETF Trading (click here learn more).
That said, there are a number of stocks – blue chip stocks from the S&P 100 – that have actually remained above their 200-day moving averages during the recent selling. For traders who are
looking for markets with edges that may be taken advantage of right now, these oversold $OEX stocks above the 200-day may be worth a look.
^SLE^
Shares of SLE closed lower for seven straight sessions leading into Friday’s trading, where they are up a bit intraday. The severity of the selling has meant that the stock has closed with a 2
-period RSI of less than 2 for three days in a row.
The last time SLE was as oversold above the 200-day as it is currently was back in early May. The stock was up well over 3% two days later.
^CPB^
Another “safety” stock that is oversold above the 200-day moving average is CPB.
CPB has closed lower for three days in a row leading into Friday’s trading. Actually, the stock’s current pullback is part of a larger move lower that began in mid-June. With a 2-period RSI
intraday on Friday of just over 6, additional weakness in the stock could provide an opportunity for traders looking to pick up shares of CPB for a short term trade to the upside.
^AAPL^
What is interesting about the fact that Apple is among those blue chips in oversold territory above the 200-day moving average is that the stock is part of the technology sector, a sector that
has been particularly hard hit by the early summer sell-off.
Shares of Apple have closed lower for three days in a row going into trading on Friday and are moving lower intraday. The stock’s 2-period RSI dropped below 5 two days ago and is currently
hovering just above 2. As with CPB above, the pullback in Apple may be another short term opportunity for traders who buy pullbacks on intraday weakness (i.e., a limit order 2-6% below the
previous close – click here to learn more).
I should add that there are exchange-traded funds that traders who would rather be on the buy-side than the sell-short-side of the market. These include the ^UUP^, which closed in oversold territory above the 200-day on Thursday and is moving deeper into oversold territory intraday on Friday.
A number of gold-related ETFs, such as the ^GDX^, the ^DGP^, and the ^GLD^ all closed in oversold
territory on Thursday but, unlike the UUP, these gold funds have bounced so far in trading on Friday.
With 7 professional, quantified trading strategies for trading both bull and bear markets, High Probability ETF Trading by Larry Connors and Cesar Alvarez was voted one of the top 10
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David Penn is Editor in Chief at TradingMarkets.com.