Grab Some Momo With These ETFs (KWT, THD, GDXJ)
Finding so-called momentum stocks, either bullish or bearish plays, isn't that hard. Nor is finding ETFs that are chock full of individual momentum plays.
Finding an ETF that's a momentum play in its own right? Well, that's a different story altogether and the task is made a bit harder when stripping leveraged funds. By design, the likes of the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and the Direxion Daily Small Cap Bear 3X Shares (NYSE: TZA) are momentum plays. They always have been and probably always will be.
Simply put, finding a plain vanilla long ETF that can qualify as a momentum play isn't as taxing as it might appear. Plenty of unleveraged ETFs have the momentum designation, for better or worse. Here are some that are screaming momentum plays at the moment and have been for a while.
Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) Short-term bearish traders have got to love the Market Vectors Junior Gold Miners ETF because the daily percentage moves this ETF makes are almost on par with that of a leveraged fund. In the past year, GDXJ has traded in a range of just over $22 to just over $40 with the low end being seen earlier this week.
GDXJ is no exception to the miners not tracking gold prices conundrum and the chart is marked by a series of lower highs and lower lows. Troubling fundamentals and bad technicals make for a great bearish momentum play. Active traders should note that GDXJ has offered up some quick upside when bouncing off $22.
SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) No single stock accounts for more than 1.66% of the SPDR S&P Oil & Gas Exploration & Production ETF's weight, so one or two names do not set the course for this highly volatile ETF. That should not be a reason to avoid XOP as a momentum play, though. As is the case with GDXJ, XOP can make intraday percentage moves that would make one think he's trading a leveraged ETF.
Highlighting its penchant for rapid gains (and losses), XOP surged over 30% from late December through March. The ETF has proceeded to tumble almost 9% in the past month. Call it momentum, call it volatility. Whatever label is applied, XOP moves hard and fast and the ETF frequently has an extremely high short interest, sometimes in excess of 100% of its float and that just adds to the volatility and big moves.
iShares MSCI Thailand Investable Market Index Fund (NYSE: THD) Apple (Nasdaq: AAPL) or Priceline (Nasdaq: PCLN) THD is not, but the lone Thailand ETF does have momentum behind it right now. Buoyed by sound fundamentals THD is a buy as long as support at $70 holds.
Looking at THD's three-year chart, this ETF does bare some resemblance to high-flying momentum stocks in that the returns are now deep into the triple-digits (assuming one bought the fund in early 2009) and that every significant dip has been a legitimate buying opportunity.
Market Vectors Solar ETF (NYSE: KWT) When it comes to solar ETFs, there are two: The Market Vectors Solar ETF (NYSE: KWT) and the Guggenheim Solar ETF (NYSE: TAN). TAN and KWT share something in common. They're excellent bearish momentum plays as both have plunged 70% in the past year.
Short-sellers take heart because there is likely more downside to come for both funds. Yield hunters should not be fooled by the juicy yields here. TAN and KWT are yield traps and with KWT trading for less than $4, it might be only a matter of time before it follows TAN down Reverse Split Boulevard.
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