High Probability ETF Trading: 7 ETFs You Need to Know for Thursday (AGG, TIP, DBB, EWT, EWS, XHB, ITB)

Wednesday’s rally brought the vast majority of exchange-traded funds out of oversold territory and into neutral or even overbought territory above the 200-day moving average. Traders looking for oversold opportunities for Thursday likely will be limited to bond funds like the ^BND^.

Today we’ll look at some of the exchange-traded funds that have moved to the top of our most overbought list. These are ETFs that are increasingly likely to pull back over the next few days and should be watched carefully by traders looking for markets that may be moving lower.

Here are 7 ETFs You Need to Know for Thursday.

In addition to BND above, bond ETFs like the ^AGG^ and the ^TIP^ (below) are typical of the markets currently trading in oversold territory above the 200-day.

TIP chart

Shares of TIP were last at these oversold levels in mid-November, shortly before the ETF rallied to close higher for the next five consecutive trading days.

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One of the biggest beneficiaries of Wednesday’s rally was the materials group. And as many materials stocks gained on the day, so did the ^DBB^ (below), gaining more than 3%.

DBB chart

The DBB was last at these overbought levels late in the first half of November, just before the stock fell from more than $24 to near $21 over the balance of the month.

Among country funds, exchange-traded funds representing both Taiwan and Singapore are the most overbought. This means traders should be wary of scaling into both the ^EWT^ and the ^EWS^ (below) until they begin to pull back.

EWS chart

EWS is at its most overbought since early November and was trading in oversold territory as recently as last Friday.

Buyers continue to bid the ^XHB^ higher. The ETF closed higher for a second day in a row and crossed back above its 200-day moving average in trading on Wednesday.

Up three days in a row heading into trading on Thursday was the ^ITB^. ITB closed higher by well over 3% in Wednesday’s trading.

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David Penn is Editor in Chief of TradingMarkets.com

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