When reviewing charts, I like nothing better than seeing a security trading pattern steadily going up over both the long and short terms.
To find funds that may be in a consistent uptrend, we can search for technically bullish-moving-average crossovers. The five-day moving average above the 20-day average signals short-term bullishness. When this coincides with the 50-day moving average exceeding the 200-day moving average, the fund may also be trending higher in the long run.
Of the 789 U.S. domiciled exchange-traded funds we track, only 130 ETFs had five-day moving averages in excess of their 20-day figures. Limiting the group to those with 50-day averages topping the 200-day average narrows the list to a manageable 41 funds.
Eighteen of these funds have or are close to giving a fresh buy signal on the moving average convergence-divergence indicator. The convergence-divergence indicator, created by Gerald Appel, uses exponential moving averages to find turning points in the price movements of securities.
Here are my favorite four trading ideas generated by the above search.
iShares Dow Jones US Oil & Gas Exploration & Production Index Fund
continues to trend higher.
This fund's largest two holdings are
. With Republican presidential nominee John McCain calling for the lifting of the federal moratorium on new offshore oil and gas drilling in U.S. waters, I am adding this fund to my list of
in a potential John McCain administration.
While the iShares DJ Oil & Gas portfolio of holdings has a median market capitalization of nearly $16.0 billion, the members of the
First Trust ISE-Revere Natural Gas Index Fund
compare at just $6.4 billion. The fund is on a tear, setting a new 52-week high this week. The top three holdings are
St. Mary Land & Exploration
Next up is the
SPDR Metals & Mining ETF
that has large holdings of
and its competitor,
Aside from the 37.3% in coal, the fund is also allocated to 31.8% iron/steel, 26.9% other mining, and 4.0% metal fabrication.
iShares Dow Jones U.S. Basic Materials Sector Index Fund
continues to trend higher. The types of materials stocks held include 52.3% chemicals, 18.3% mining, 12.3% iron/steel, 11.2% coal, and 4.3% forest products.
If the leading holdings of
can pass along price increases to consumers, their prospects are good.
In the current inflationary environment, all four of these funds can benefit from U.S. dollar denominated, hard-asset security holdings.
As with any trading strategy, you can lose money. So, please remember to place your stop-loss orders to help protect you from large moves against your positions. Good luck.
For an explanation of our ratings,
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.