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Two ETFs to Short, and Two to Buy

With all the flaming red arrows arching across Wall Street on Tuesday, stocks remain on fire. But whether it is a fire sale on exchange-traded funds or a forest fire, where good funds get scorched along with the bad ones, remains to be seen.

With the Dow Jones Industrial Average swooning 226 points yesterday, what was once a resistance level on the way up -- 13,690 points -- is now acting as an important level of support. The bulls and bears have drawn the line in the sand and are fighting it out.

Either way the overall market goes, the resulting volatility this summer opens trading opportunities to either sell short or to go long.

Technically bearish ETFs have a five-day moving average share price below their 10-day moving average share price, with a moving average convergence-divergence indicator giving a fresh sell signal within the last 10 days. The convergence-divergence indicator, created by Gerald Appel, uses exponential moving averages to find turning points in the price movements of securities.

ETFs that are considered technically bullish are the complete opposite. They have a five-day moving average above their 10-day moving average and a convergence-divergence indicator giving a fresh buy signal within the last 10 days. They must also have set a new 52-week high in the last five trading days.

Here are four trading ideas. The first two are poor performers that have bucked the major upward trend of the market over the last few months but are gapped lower as the market's short-term direction turns south. Both are giving technically bearish signals.
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Chart of I:DJI
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