When ETFs drop to support levels and become oversold, they tend to rebound or rally. That may be the case with The Real Estate Select Sector SPDR Fund (NYSE:XLRE).
On the following chart, the red line is two standard deviations below the 20-day average price. This is important. Standard deviation is a statistical concept and many trading strategies are based on statistics and probability theory.
They suggests that 95% of trading should be within two standard deviations of the mean or average. If this threshold is exceeded, trading programs will be expecting a reversal. They will buy XLRE and may end up pushing the price higher.
XLRE is also at a support level. The last few times it dropped to $44.30, the buyers overpowered the sellers and pushed the price higher.
When markets are oversold and fall to support, they tend to rally. That could happen here.
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