3 ETFs in Under-The-Radar Rally Mode
Finding ETFs that are up on a year-to-date basis is not difficult. That is certainly one positive of result of U.S. stocks continuing to grind higher to hover near record highs. What is harder for investors is finding unheralded ETFs that offer decent upside potential going forward.
With that in mind, a screen was run for ETFs that are in positive territory over the past month that are showing signs of potentially breaking to new highs. The additional criteria for the ETFs featured is that, while none are particularly small or illiquid, they are also not as widely followed or as heavily traded as some of their direct competitors.
For example, a sector fund such as the Energy Select SPDR (NYSE: XLE), an impressive year-to-date performer to be sure, was excluded from this list in favor of an ETF such as FCG.
First Trust ISE-Revere Natural Gas Index Fund (NYSE: FCG) Including Thursday's gain of about 3.7 percent, the First Trust ISE-Revere Natural Gas Index Fund has surged six percent in the past month. What is important about FCG's Thursday gain is that it arrived on strong volume (more than 25 percent above the daily average) and solidified the ETF's recent break of resistance at $16.50.
Those that follow seasonal trends probably are not surprised. February marks the start of the strongest four-month period of the year for energy equities and FCG was predicted to be a beneficiary of that trend.
In terms of upside potential going forward, FCG has it. Even with Thursday's strong move to the upside, the ETF is still about 10 percent below its 52-week high. Something else to consider: While many of FCG's constituents are actively attempting to boost oil production, the market still perceives the ETF to be a natural gas play. In the near-term, that might not be a bad thing as the U.S. Natural Gas Fund (NYSE: UNG) looks to be breaking out for a run to $23.
Global X FTSE ASEAN 40 ETF (NYSE: ASEA) On a year-to-date basis and in the past month, the Global X FTSE ASEAN 40 ETF is only modestly higher, indicating the fund has been somewhat hampered by its heavy allocations to Singapore and Malaysia. Those two countries combine for about two-thirds of the fund's weight. On the other hand, it can be said that ASEA has held up well given political tensions in Malaysia.
Two of 2013's top-performing emerging markets, Indonesia and Thailand, are supporting ASEA. Given the recent strength in the equity markets of those two nations, if ASEA could get the benefit of some help from either Singapore or Malaysia, not necessarily both thought that would be perfect, the ETF could break resistance around $17.60 and start a new leg higher.
WisdomTree Japan SmallCap Dividend ETF (NYSE: DFJ) With all the attention being paid to the WisdomTree Japan Hedged Equity Fund (NYSE: DXJ), some investors might think that fund is the only Japan offering from WisdomTree (NASDAQ: WETF). That is not the case as indicated by the WisdomTree Japan SmallCap Dividend, which like DXJ, is up more than seven percent in the past month.
DFJ does not feature the USD/JPY hedge that has made DXJ so popular, but the small-cap fund is exposed to a falling yen through a combined 45.6 percent allocation to Japanese industrial and consumer discretionary names, two export-heavy sectors.
Do not be deceived by the fact that DFJ is mere pennies below its 52-week high. A move above $47 combined with ongoing weakness in the yen could put DFJ in position to attack its 2007 high just under $54.
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