High Probability Trading Report: Rally in Real Estate and More Leveraged ETF Gains

There are a few stocks from last week that were picked up by some of our high probability trading screens. But many of the true high probability gems came from the world of exchange-traded funds (ETFs) where ETFs from the ^VNQ^ to the ^SDS^ made significant short term gains.


Over the past few days, stocks like ^SOMX^ have made sharp, one-day rallies after closing in extremely oversold territory. Also rising from recent oversold lows in recent days are gambling related names like ^BYD^ and ^LVS^ (below).

LVS Chart

LVS rallied by more than 5% from its oversold closing low on Monday.

Looking forward over the next five days, some of the stocks that high probability traders should keep their eyes on include oversold names like ^GMCR^, ^FCX^ and ^DAL^.

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Exchange-traded Funds:

If there was one sector that as benefitted from recent buying, then that sector might be real estate and REITs. Five exchange-traded funds, including VNQ above but also the ^URE^ (below) , the ^ICF^ and the ^RWR^ all made significant short term gains after reaching oversold levels above the 200-day moving average.

URE Chart

Outside of real estate, other short term ETF gainers include the ^XLI^ and the iShares Russell 2000 Index Fund, both up approximately 2% in two days after rallying from oversold lows.

Traders looking for potential new opportunities in the ETF markets over the next few days might want to add oversold country funds like the ^EWH^ and the ^ILF^ to their short term watchlists.

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Leveraged ETFs:

When it comes to trading leveraged ETFs using high probability trading strategies, the more oversold the better. In fact, leveraged ETFs often have to reach levels of oversold that are more comparable to those with stocks than with regular, non-leveraged ETFs before high probability traders put them on their trading watch lists.

Consider the SDS mentioned above. The ProShares UltraShort S&P 500 ETF closed lower for five out of six consecutive trading days in early April. But it was not until after all of that selling that the fund reached levels from which, according to our testing, they have historically advanced.

SDS Chart

Similar short-term rallies could be found in the ^DXD^ and the ^TZA^.

David Penn is Editor in Chief at TradingMarkets.com.