High Probability Trading Report: Gold, Country Funds and Pharmaceuticals

A reversal back to the upside from intraday lows characterized Thursday’s trading, leading Larry Connors to tell traders following his Daily Battle Plan trading service that “this is solid, bull market behavior”.

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While high probability traders should take advantage of current strength to exit positions entered at lower levels, this is also a good time to survey the landscape for potential new opportunities in stocks, ETFs and leveraged ETFs as the current week ends and the new week is set to begin.


The number of high probability opportunities in stocks has been relatively modest over the past week. But among those stocks that did retreat into oversold territory over the past few days are ones like ^OEH^ (below), which is up more than 7% after closing in oversold territory above the 200-day moving average, as well as ^MBLX^, which soared by more than 11% on Thursday alone.

OEH Chart

For Friday and beyond, high probability traders may want to add oversold stocks like ^ZGEN^ and ^FSIN^ to their watchlists.

Exchange-traded Funds (ETFs):

Going into trading on Friday, there are a number of opportunities for high probability traders to take exits in a number of exchange-traded funds that have rallied into strength in recent days. These include funds like the ^XME^ and the ^GDX^ (below), both of which earned buy signals from our High Probability ETF Trading Software earlier in the week.

GDX Chart

Looking forward, many of the best potential trading opportunities for high probability traders continue to be in country ETFs (especially Asia), health care and pharmaceuticals and agribusiness. Consider the ^MOO^ (below), which pulled back into oversold territory above the 200-day moving average on Thursday.

MOO Chart

Other ETFs that have retreated to oversold territory above the 200-day moving average include the ^EZA^ (below). The EZA closed in oversold territory for two days, then rallied back into neutral territory for two days before retreating back into oversold territory on Thursday.

EZA Chart

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Leveraged ETFs:

On the leveraged ETF front, most leveraged ETFs have reversed lower, but have not yet returned to those extreme oversold levels from which, according to our testing, they have historically advanced. In fact, going into trading on Friday, we have no leveraged ETFs that are in oversold territory, let alone the sort of extreme oversold levels that must first be reached before these securities become worthwhile potential trades for high probability traders.

One leveraged ETF for traders to keep an eye on is the ^EZJ^ (below).

EZJ Chart

Although liquidity in EZJ is still building, this fund has moved dramatically lower in recent days and may be only a day or two away from reaching truly oversold territory. Also in this group is the ^ULE^.

David Penn is Editor in Chief at TradingMarkets.com.