Market Overview

Five More ETF Mendoza Line Candidates


It has been a while since Benzinga examined some ETF Mendoza Line candidates. That is ETFs trading below their 200-day moving averages.

Our last examination turned up three commodities equities funds, one emerging markets ETF and one consumer staples play. Of that group, just one is above its 200-day line today, but four of the five have made nice gains since our October piece.

Let's see if we can repeat the trick today with five ETFs residing below their 200-day moving averages that could be poised for some nice moves in 2012. To narrow the field down, we screened for ETFs trading 20% or more below their 200-day lines and that search turned up just over 100 funds.

Market Vectors Brazil Small-Cap ETF (NYSE: BRF) The Market Vectors Brazil Small-Cap ETF is one of those ETFs investors want to like and then they get scared off (rightfully so) by what is an ugly chart. BRF is less than 4% off its 52-week low, but almost 24% below its 200-day moving average. Put another way, if BRF can hold support at $35, it might be worth looking into.

There's a decent chorus of pundits that expect Brazilian stocks to rebound this year and waiting for BRF to reclaim its 200-day moving average means missing out on lots of potential gains.

Global X Aluminum ETF (NYSE: ALUM) The Global X Aluminum ETF just celebrated its first anniversary since inception and the ETF's returns might be worth celebrating this year if, and probably only if aluminum sector consolidation arrives. Rio Tinto (NYSE: RIO), ALUM's largest holding at over 17% of the ETF's weight, could easily afford to snatch up several of ALUM's smaller holdings. ALUM is 26% removed from its 200-day line, but ETF has been a decent performer to start 2012, gaining over 4% this week.

PowerShares DB Silver ETF (NYSE: DBS) Indeed, there is another silver ETF out there competing with the iShares Silver Trust (NYSE: SLV) and the ETFS Physical Silver Shares (NYSE: SIVR). The PowerShares offering tracks an index, meaning it does not hold physical silver. What it shares in common with SLV and SIVR is volatility and ugly charts. That said, DBS has gotten off to a nice start this year and could add to those gains above resistance at $50 and $55. DBS is almost 22% below its 200-day line.

Global X China Industrials ETF (NYSE: CHII) The Global X China Industrials ETF, like so many of its China ETF peers has been punished in the past year. However, investors might be underestimating the potential this ETF holds. Nearly every stock in this ETF can be helped out by robust Chinese economic activity or the Chinese government committing to more infrastructure and public works projects.

CHII closed around $10 today and the 200-day moving average is around $13, but this is one example where waiting for the ETF to edge closer to the 200-day line would be advisable because the potential exists for sizable gains once that level is taken out.

iShares MSCI Austria Investable Market Index Fund (NYSE: EWO) Even amongst a lineup that includes that includes a Brazil ETF and a China ETF, EWO can be considered speculative. Hey, at least Austria has an AAA credit rating. The risks with EWO are obvious and the ETF would be in grave danger if support at $12 doesn't hold. EWO currently resides 26% below its 200-day moving average.

Posted-In: Long Ideas News Sector ETFs Short Ideas Specialty ETFs Emerging Market ETFs Technicals Commodities Best of Benzinga


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