High Probability Trading Report: Gold, Bonds Among Most Oversold ETFs

Going into trading on Wednesday, the most oversold exchange-traded funds (ETFs) right now are precious metals related – especially gold – or bond-related. For traders looking for markets that are oversold and potentially undervalued in the short term, gold and bond ETF markets appear to offer some of the best potential opportunities.


Three gold-related exchange-traded funds are among the most oversold ETFs in our ETF universe. These include the ^DGP^, the ^GLD^ and the ^IAU^ (below).

IAU Chart

IAU has closed lower for three consecutive trading days leading into Wednesday’s trading and is moving lower in the first hour of trading on Wednesday as well. This selling means that IAU has closed in oversold territory above the 200-day for the past two days. Additional weakness above the 200-day will likely encourage more high probability traders to consider scaling in to this oversold fund.


The most oversold ETF in our database right now is actually a bond ETF, the ^SHY^.

SHY is bouncing early in trading on Wednesday. But other oversold bond ETFs are still in oversold territory or even moving lower. This includes the iShares Barclays 20+ Year Treasury Bond Fund ^TLT^ (below).

TLT Chart

Other oversold bond ETFs include the ^AGG^ and the ^IEF^.

In addition to these opportunities in oversold ETFs, there are a number of country funds that have become overbought below the 200-day moving average and may be worth watching for traders looking to take further advantage of the broader market’s overall overbought condition. These funds include the ^EWU^, the ^EWI^ and the ^EWP^ (below).

EWP Chart

High Probability Trading Tip:

Remember that when buying regular, non-leveraged exchange-traded funds, be sure to only buy markets trading above the 200-day moving average. The same is true when it comes to scaling-in to additional units. If you begin scaling in above the 200-day moving average, for example, and the market falls below the 200-day, do not continue to add additional units.

For more high probability trading tips, be sure to click here to pick up your copy of the best-selling trading book by Larry Connors and Cesar Alvarez, High Probability ETF Trading – now available in paperback!

David Penn is Editor in Chief at TradingMarkets.com.