- A classic buy-the-dip setup is beckoning in the VanEck Gold Miners ETF (GDX).
- Bitcoin prices are trying to turn higher, making the ProShares Bitcoin Strategy ETF (BITO) worth a shot.
- If small-caps can push above the 50-day moving average, bull puts on the iShares Russell 2000 ETF (IWM) have a green light.
Earnings season is upon us, and it’s increasing the difficulty of trading individual stocks with confidence. It’s not that their prices are destined to fall – they could very well rise. It’s that volatility and significant overnight gaps might throw a monkey wrench into otherwise pristine patterns. For that reason, many traders avoid holding short-term positions into these quarterly reports. But you don’t have to sit out the next few weeks in cash. Here are three ETFs to buy that will allow you to sidestep the uncertainty altogether.
Two of today’s selections follow a broad basket of equities. The diversification means that a dramatic price gap from a single component won’t upset the entire fund. The third ETF doesn’t just sidestep earnings. It bets on an entirely different asset class – cryptocurrency.
Together, these three offer compelling bullish trades based on recent price movements.
|GDX||VanEck Gold Miners||39.78|
|BITO||ProShares Bitcoin Strategy||25.72|
|IWM||iShares Russell 2000||202.93|
3 ETFs to Buy: VanEck Gold Miners ETF (GDX)
Precious metals and gold miners have behaved just as you’d expect in an inflationary environment. They’re booming. I suspect a certain percentage of the dollars flowing out of stocks is finding its way into the likes of GDX. Sure, the fund is still exposed to stocks, but gold mining companies follow gold prices more than the S&P 500. And that’s been a great thing recently.
The Gold Miners ETF (NYSEARCA:GDX) is up 24% year-to-date.
But Tuesday’s ramp in risk assets took the wind out of its sails. The decline has GDX close to testing its rising 20-day moving average. Every dip has been a buying opportunity this year, and I suspect this one will prove similar. Usually, I’m a fan of selling puts, but implied volatility has fallen enough to make the premiums too small. I like buying diagonal call spreads instead.
The Trade: Buy the June $37 call while selling the May $42 call for $3.
This is a bullish-leaning position with a profit of over $2 per contract if GDX sits above $42 in a month.
ProShares Bitcoin Strategy ETF (BITO)
The Bitcoin Strategy ETF (NYSEARCA:BITO) is quickly becoming my favorite bitcoin proxy. It’s designed to track the digital currency by owning short-term bitcoin futures. So far, it’s succeeded in tracking the spot price of bitcoin with a high degree of correlation. The recent decline in risk assets saw BITO tumble below the 50-day moving average, but we’ve since seen prices stabilize.
If you want more confirmation that bulls are returning before entering, I suggest waiting for a push back above the 50-day moving average. I’m encouraged by the lack of downside follow-through and Tuesday’s second straight session of gains. However, I’m going with a naked put play to increase the odds and profit even if bitcoin stagnates.
The Trade: Sell the May $22 naked put for 50 cents.
Consider this a bet that BITO stays above $22. If it doesn’t, you’re obligated to buy 100 shares at $21.50.
ETFs to Buy: iShares Russell 2000 ETF (IWM)
The final idea for top ETFs to buy takes us to the land of small caps. The iShares Russell 2000 ETF (NYSEARCA:IWM) surged 2% Tuesday, carrying prices to the doorstep of a breakout above significant resistance. $202 has kept a lid on prices for two straight weeks and also houses the 50-day moving average. If we climb above it on Wednesday, I think bullish trades have a green light.
That said, I much prefer high probability cash flow plays over directional ones. The market backdrop remains treacherous, and I think it’s worth limiting the upside in exchange for better odds of success.
The Trade: Sell the May $188/$183 bull put spread for 75 cents.
As long as IWM remains above $188, the put spread will expire worthless, allowing you to pocket the 75 cents.