Market Overview

3 ETFs To Buy On Weakness (XHB, GEX, IAT)

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The Dow Jones Industrial Average hit a new all-time high last week, and the S&P 500 is on pace to join it.

While there are numerous ETFs hitting highs along with the major indices, even more lag behind the market, hurt by sector rotation the last few weeks.

Three such ETFs have finally found support. Based on the charts and the fundamental outlook it could be time to buy the laggards ahead of a potential breakout.

The SPDR Homebuilders ETF (NYSE: XHB) would at first glance appear to be a basket of homebuilding stocks. That is not reality as only 27 percent of the ETF is composed of companies that build homes. The remainder of the ETF is spread between home products, home furnishings, appliances and retail.

The ETF had pulled back over 11 percent from a multi-year high before finding a floor late last week. The low happened to coincide with the low of 2014 and the ETF promptly rallied, creating a bullish double-bottom pattern. If the housing market's slow recovery continues, it could spread to all the sectors that make up the ETF.

Related: Bond ETFs Outperforming Stocks (TLT, JNK, HYD, VWOB, SPY)

Green energy stocks have had a wild ride the last few years as they moved from momentum plays to a business that seems somewhat viable.

The Market Vectors Global Alternative Energy ETF (NYSE: GEX) is a basket of 30 stocks in the solar, wind, battery and related alternative energy sectors.

Only 61 percent of the stocks are based in the U.S., with Denmark and China making up 22 percent of the allocation.

A 12 percent pullback from a yearly high ended last Thursday, just above the low of April and the ETF has started to rebound. Investors that believe there is money to be made in the green energy space could view the pullback as a long-term buying opportunity.

Both the large financial institutions and the regional banks have had a tough few months for varying reasons.

The iShares U.S. Regional Banks ETF (NYSE: IAT) hit a five-year high in March before pulling back nine percent to a low hit last week. Over the past few days, the ETF has been forming a base, as the selling appears to have subsided.

The one overwhelming positive future catalyst for the regional banks is that they will not be as affected by rising interest rates as some of their larger peers will. On top of that, their business model is much easier to decipher than that of the large institutions.

Technically, the ETF continues to remain in the uptrend even after the pullback, which is bullish and considered a buy signal.

Posted-In: ETFs Green Energy iShares U.S. Regional Banks ETF SPDR Homebuilders ETFSector ETFs Trading Ideas ETFs Best of Benzinga

 

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