Stocks

Should Traders Fade Strength in Europe?

Before taking a look at some of the biggest edges in exchange-traded funds heading into trading on Tuesday, let's take a look at the stocks from my last 5 Stocks for the Next 5 Days column, "Black Friday Buying and Nasdaq Bargains."

Shares of Intuitive Surgical ( ISRG ) rallied by well over 2% on Monday, finishing above their short-term, 5-day moving average. ISRG had pulled back for seven days in a row, the last five in technically oversold territory, before Monday's bounce.

Up more than 4% after a similar seven-day retreat were shares of Google ( GOOG ). Read more about Google in our DataTrader article, "Going, Going ... Google!" here . Like ISRG, GOOG had finished in oversold territory for the past five trading days.

Although not pulling back into technically oversold territory, shares of Alexion Pharmaceutical s ( ALXN ) responded to a two-day pullback with a strong rally that took the stock higher by more than 7%. Monday's close marked the stock's highest finish in a month.

IAC/Interactive Corp ( IACI ) was also among those stocks that rallied by more than 4% after pulling back for seven days and becoming extremely oversold.

A gain of more than 1% was not enough to bring shares of Tractor Supply Co ( TSCO ) up above their 5-day moving average. The stock had closed in oversold territory for the previous four trading days.

Here are 5 ETFs for the Next 5 Days

Strength on Monday has put a number of exchange-traded funds in or near overbought territory below the 200-day moving average. Among the more overbought ETFs are the Market Vectors Russia ETF (RSX), which has closed higher for two days in a row and is now overbought in bear market territory , and the iShares MSCI Malaysia Index Fund ETF (EWM). EWM gained more than 2% on Monday to finish higher for three out of the past four trading days.

Soaring by more than 6% were European funds like the iShares MSCI France Index Fund ETF (EWQ). We wrote about EWQ in our Trading By the Numbers column, "European ETF Rally Tempts Sellers Once Again" here .

The sharp rally in EWQ was part of a broad-based advance in European country funds, as another rumor of a positive resolution to the region's debt crisis rippled through the markets on the first trading day of the week. Also higher were European funds like the iShares MSCI Spain Index Fund ETF (EWP) and the iShares MSCI Sweden Index Fund ETF (EWD), both up more than 5% and short-term overbought below the 200-day moving average .

Additional strength in these country funds trading in overbought territory will find them trading at levels where they have historically run into selling pressure, reversed, and moved lower short term. For recent examples of these sell-offs from short term overbought conditions, read "Selling the Buying in Emerging Markets" here .

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David Penn is Editor in Chief of TradingMarkets.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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