Five ETFs to Buy On A Pullback
Lot of ETFs and ETNs are positive year-to-date. That's no exactly breaking news two weeks into February. Well, lots of exchange traded products residing well into the green can also mean a lot are overbought. Indeed, the number is high. Over 500 ETFs and ETNs, more than a third of the the entire exchange traded products universe, currently sport an RSI of 70 or higher.
To narrow that universe down to a more workable number, we screened for ETFs and ETNs with a beta of over one. That drops the number by about 75%, but still turns up a group with plenty of options that fit the bill as "buy on a pullback" candidates.
For now, we'll start with a group of five that's a mixture of familiar names and surprises, too.
EGShares Emerging Markets Metals/Mining ETF (NYSE: EMT) Only a few places offer up any thoughtful analysis on EMT. As we always popularity doesn't equal good returns. Brazil, South Africa, China and Russia dominate EMT's country allocations so it's easy to understand why this fund was a mess in 2011 and why it has surged over 24% to start 2012.
Bottom line is EMT would be worth a look on a pullback to around $17.25. If not, the next best option is consolidation around $18 before another breakout.
Vanguard Value ETF (NYSE: VTV) The Vanguard Value ETF barely has a beta above one and the ETF probably only gets there because of a 22.4% allocation to financials. Beyond that, VTV is blue-chip lover's paradise and a frugal investor's friend as the ETF has an expense ratio of 0.12%.
The problem with waiting for a big pullback with VTV is that it probably means the broader market has suffered some big losses. Assuming that doesn't happen (and let's hope it doesn't), try to scoop VTV up around $55. If the broader market grinds higher throughout 2012, VTV could head to the high $50s or low $60s.
iShares MSCI Mexico Investable Market Index Fund (NYSE: EWW) Resurgent U.S. and Brazilian equities have turned into a perfect storm for EWW and the ETF is now up almost 14% year-to-date. Volume buffs will like the fact that several of EWW's recent up days have come on above average turnover, usually a bullish sign. The $58-$59 area would be a nice buy point, but we've got to admit EWW could $64 before it sees $59 again.
PowerShares Dynamic Media Portfolio (NYSE: PBS) There a couple of things that are surprising about PBS. First, the ETF offers no exposure to Walt Disney (NYSE: DIS). Second, media in this case can also mean social media as PBS features a 2.7% allocation to LinkedIn (NYSE: LNKD). If PBS falters to $13.50, that looks like firm support and a place to start a small position.
PowerShares Zacks Micro Cap ETF (NYSE: PZI) The useful thing about an ETF like the PowerShares Zacks Micro Cap ETF is that micro-caps are a fine way of gauging just how much money managers and investors are willing to embrace risk. Up almost 11.6% year-to-date, PZI tells us that risk has been embraced this year. A pullback to psychological support at $11 would be nice, but consolidation around $11.25-$11.50 could be constructive as well.
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