Trouble Ahead: ETFs That Will Retest 52-Week Lows (KOL, EWJ)


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Apparently, Mr. Market didn't get the memo that April is supposed to be a good month for stocks. Six trading days into the fourth month of the year and it looks as though April will have started on an ominous tone to say the least as the S&P 500 has violated support at 1,375 and the Dow Jones Industrial Average has slid to two consecutive triple-digit losses.

That's bad news for a plenty of ETFs, not just single stocks. With the belief that knowing what to avoid or what to short is just as good as knowing what to embrace from the long side, we went searching for those ETFs that stand a valid chance of retesting their 52-week lows and doing so soon. Bond funds and leveraged ETFs were excluded so the list is comprised exclusively of plain vanilla equity-based funds.

Here's what we came up with.

Global X FTSE Argentina 20 ETF (NYSE: ARGT ) Yes, Argentina is the "A" in CAPPT, the best emerging markets acronym no one is talking about. However, we also view Argentina as the riskiest of the five CAPPT nations.

Thinly traded, ARGT might find some relief due to the fact that it's neither shortable, nor optionable, according to Finviz data. Unfortunately, Argentina's hostile business environment has plagued ARGT recently and the fund has shed 11% in the past month. If ARGT loses another 11%, the 52-week low comes into play.

iPath DJ-UBS Natural Gas TR Sub-Index ETN (NYSE: GAZ ) GAZ has found its way into the spotlight following all the controversy surrounding volatility ETNs and that helps explain why the ETN is down more than 26% in the past month.

Don't be fooled by the fact that GAZ trades 26.4% above its 52-week low. Depressed natural gas prices will continue to weigh on this ETN and that's just one matter to deal with. As of yesterday, GAZ's daily indicative value was $2.06 meaning the ETN trades at a better than 50% premium to its indicative value. It's fair to say some short sellers are aware of that fact.

Market Vectors Coal ETF (NYSE: KOL ) The Market Vectors Coal ETF and its constituents, especially the U.S.-based ones, face wide-ranging issues that make dip buying in the near-term a risky endeavor. There might be a bull case for KOL, but traders can afford to wait and see if the October 2011 low just over $27 acts as support. There's no need to be long KOL right now.

iPath DJ-UBS Coffee TR Sub-Index ETN (NYSE: JO ) We're fudging a bit here because the iPath DJ-UBS Coffee TR Sub-Index ETN just touched a new 52-week low a few days ago before bouncing back, sort of. JO was one of the worst performing commodities ETNs in the first quarter and softs prices have been getting killed lately, another reason not to put this JO in your cup.

iShares MSCI Japan Index Fund (NYSE: EWJ ) The iShares MSCI Japan Index Fund is a low-beta, slow-moving ETF, so it could take a while for this fund to drop another 11% to get back to its 52-week low. That doesn't mean it won't happen. Global investors still have some affinity for the yen as a risk off currency after the U.S. dollar and that crimps profits for Japanese exporters. Further gains by the CurrencyShares Japanese Yen Trust (NYSE: FXY ) would be the sign EWJ is in for more downside.

(c) 2011 All rights reserved. This material may not be published in its entirety or redistributed without the approval of Benzinga.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Commodities , ETFs , Futures , Investing Ideas
Referenced Stocks: EWJ , FXY , GAZ , JO , KOL

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