Market Overview

Sell In May And Go Away With These ETFs (DUG, UNG, XLV)


After today, there are 15 trading days left in April and that might not be a good thing because the month of May brings with it the start of the six-month cycle of the year that is historically challenging for stocks. Put another way, there is good reason why the expression "Sell in May and go away" exists.

There are some sectors and corresponding ETFs that do have a penchant for performing well in the second quarter, but those looking to bet on the earnest return of "sell in May and go away" would do well to consider the following the funds.

Health Care Select Sector SPDR (NYSE: XLV) It sure feels like with each passing day the reasons grow to be associated with low beta fare if one insists on being long right now. The Consumer Staples Select Sector SPDR (NYSE: XLP) and XLV have both been solid performers in the past month perhaps a sign the risk on trade was fading.

Another health care-related ETF to consider from the long side is the iShares Dow Jones US Healthcare Provider Index Fund (NYSE: IHF), particularly if it falls another 2.4% to its 50-day moving average.

Vanguard Consumer Discretionary ETF (NYSE: VCR) Call them consumer discretionary or call them consumer cyclical stocks, whatever label is applied, just remember that these stocks are historically vulnerable to selling pressure come May. That means VCR is a short recommendation. VCR has had a nice year gaining almost 17%, but selling pressure would almost certainly accelerate on a decline below $69.

VCR is shortable, but does not have options trading on it. The Consumer Discretionary Select Sector SPDR (NYSE: XLY) does have options available on it. Or consider the thinly traded ProShares UltraShort Consumer Services (NYSE: SCC).

United States Natural Gas Fund (NYSE: UNG) As if the United States Natural Gas Fund (NYSE: UNG) needs any more problems we're heading into the time of year when the short natural gas trade usually works.

For those that don't want to short UNG directly, the ETF is home to robust options activity. Call sellers may find some of the May premiums compelling.

Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) The Direxion Daily Financial Bear 3X Shares should not be held over multiple months as that strategy exposes traders to an above average amount of risk. On the other hand, financials are the second-largest sector weight in the S&P 500 behind technology, implying that if the broader market pulls back, financials probably won't escape the calamity.

With earnings on tap this Friday from J.P. Morgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC) traders will be given some clues regarding the near-term strength of bank stocks. Assuming those reports are bad and the support for the S&P 500 is violated at 1,375, FAZ becomes a worthwhile trade well before May rolls around.

ProShares UltraShort Oil & Gas (NYSE: DUG) The charts for major equity-based energy ETFs such as the Energy Select Sector SPDR (NYSE: XLE) have deteriorated rapidly in recent weeks and last Friday's March jobs report was just one more excuse for traders to hammer oil equities and ETFs. Above $25, DUG has plenty of room to run higher.

Posted-In: Earnings Long Ideas News Sector ETFs Short Ideas Specialty ETFs Futures Technicals Best of Benzinga


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