Market Overview

Five Oversold Sector ETFs To Consider


The recent market calamity is good for two things regarding ETF investing and trading. First, it has been a great time to get involved with inverse funds and profit from the declines. Second, this recent pullback has put some pretty good ETFs on sale.

In an effort to do some shopping at a discount, we screened for ETFs that are now oversold as indicated by stochastics, RSI or both. We removed leveraged and inverse funds from our list, so here are five traditional ETFs that are currently oversold that might be worth a look.

1) iShares S&P Global Industrial Sector Index Fund (NYSE: EXI): Trading above $60 at its April peak, EXI has tumbled down to the $55-$56 area and from a technical perspective, it might be best to let the ETF reclaim its 50-day line above $57 before piling into this fund. Still, if you're a believer that large-caps will lead the market into year-end, you'll want to consider EXI which features Dow components GE (NYSE: GE), Caterpillar (NYSE: CAT) and United Technologies (NYSE: UTX) among its top-10 holdings.

2) First Trust Financials AlphaDEX Fund (NYSE: FXO): OK, this one is for the truly adventurous among us. It can be argued that some sector ETFs have been unjustly punished, EXI is an example. On the other hand, there is usually good reason to punish financials and FXO has an ugly chart as a result. Even true believers can probably wait for another 7%-10% to come off FXO before getting involved.

3) Market Vectors Coal ETF (NYSE: KOL): While KOL has been hammered by the “beta off” trade, its relative strength has been decent (or less bad) in recent weeks. There are signs that KOL is trying to correct its oversold condition and of the three members of this list thus far, KOL is looking the sportiest. Savvy investors realize little, or perhaps nothing, has changed regarding coal's fundamentals in recent weeks.

4) Global X Lithium ETF (NYSE: LIT): LIT was a stud almost immediately after its 2010 debut, but this ETF has been taken to the woodshed in recent weeks. Lithium demand is likely to remain strong, but the problem here is that supply isn't an issue. That turns LIT into a technical play and like FXO, this one isn't for the weak hands. Just about 20 cents above its March low, LIT might be worth a quick trade here with the intent of capturing 10% and then going on your way.

5) First Trust Global Wind Energy ETF (NYSE: FAN): We said the members of this list MIGHT be worth considering and FAN is, but this one could be best from the short side. The reward with an ETF like FAN is that high oil prices tend to boost alternative energy plays, like wind and solar. The other side of that coin is that when oil slumps, as it has recently, enthusiasm for green energy investments diminishes and does so quickly. For those that must deal with FAN from the long side, wait for another 5% to come off.

Posted-In: Long Ideas News Sector ETFs Short Ideas Specialty ETFs Commodities Intraday Update Markets


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