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Three ETFs To Buy On The Pullback (PJP, SKYY, SPY)

Three ETFs To Buy On The Pullback PJP, SKYY, SPY

The stock market pulled back like clockwork over the last few weeks as the S&P 500 fell six percent from an all-time high to the low on Wednesday.

Looking back at the last 15 months, the largest pullback the index suffered was six percent and each time the sell-off hit the four to six percent range it resulted in a market rally to a new high.

Add in the CBOE Volatility Index (VIX) hitting a yearly closing high this week and it was a great setup for stocks to bounce. The jobs number on Friday morning was the one wild card that could have trumped all the technical indicators, but not even a poor number could hold back the equity rally.

See also: ETF Outlook For The Week Of February 10

At this point it appears buying into the current weakness is the best strategy for intermediate to long-term investors. There are a number of ETFs that are still trading off their highs and the lower prices are creating an opportunity for investors.

PowerShares Dynamic Pharmaceutical ETF (NYSE: PJP)

The ETF is a basket of 30 U.S. pharmaceutical stocks based on a number of factors that include price and earnings momentum, quality, management action and value. During the pullback the ETF fell by seven percent and held the 50-day moving average for all but two days. What differentiates PJP from its peers is that it includes both biotech and large pharmaceutical companies versus a concentration on one or the other.

The top three holdings are Merck (NYSE: MRK), Biogen Idec (NASDAQ: BIIB) and Gilead Sciences (NASDAQ: GILD). The expense ratio is a little higher than competitors at 0.63 percent, however it is worth it based on past performance.

First Trust ISE Cloud Computing ETF (NYSE: SKYY)

The niche technology ETF has a distinction that not many ETFs can brag about this week. The ETF did not close below its 50-day moving average during the pullback, a feat that is impressive considering the market-wide selling. Sitting less than one percent off its all-time high hardly represents a pullback, however the relative strength makes the ETF a buy candidate. The top holdings include Juniper Networks (NASDAQ: JNPR), F5 Networks (NASDAQ: FFIV) and Akamai Technologies (NASDAQ: AKAM).


If the goal is to capture the market, SPY is a great choice. The ETF tracks the movement of the S&P 500, which contains the largest 500 stocks in the U.S. If the pattern of pulling back six percent and rallying continues, SPY should see a sizable gain in the coming weeks. Because the ETF encompasses all sectors it will help investors take a more diversified approach versus the first two ETFs mentioned.


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