These three ETFs carry low risks but potentially high rewards

As soon as you drive a new car off the lot, the value drops by thousands of dollars. A couple of my friends are skilled enough to buy used cars, drive them for a while and sell them for more than what they paid for them.

Here I’ll replicate the same concept with exchange traded funds (ETFs). Here are my top three “discount” ETFs right now. All three come with high yields, low risk and attractive risk/reward profiles.

Read: Here are the 20 stocks that the biggest hedge funds love most

Consumer Staples Select Sector SPDR ETF (TICKER:XLP) 

The Consumer Staples Select Sector SPDR ETF lost as much as 17% of its value since its January high. This is the biggest percentage loss since 2008. The ETF has an annual yield of 2.97%.

Even though the price dropped to a new low recently, momentum (as measured by RSI, or the relative strength index) did not. This is called a bullish divergence.

Technical resistance (red line) is around 50.10; support (green line) is around 47.50. A move above 50.10 or to 47.50 would be a first indication that Consumer Staples Select Sector is ready to move higher.

iShares 20+ Year Treasury Bond ETF (TICKER:TLT) 

With 10-year Treasury yields above 3%, many are afraid of a bear market for Treasuries. At some point Treasuries will fall into a bear market, but based on investor sentiment, seasonality and technical analysis, now is not the time.

In fact, sentiment, seasonality and technicals suggest Treasury bonds are setting up for a rally. Longer-maturity Treasuries will rally stronger than short-term maturities.

The chart above plots 30-year Treasury futures against commercial hedgers’ (smart money) exposure. The smart money is betting on higher prices.

Seasonality (insert at top right) is also pointing higher.

The green trend line support is near, and according to Elliott Wave theory, 30-year Treasuries may be about to conclude a 3-wave decline.

The iShares 20+ Year Treasury Bond ETF comes with a yield of 2.59% and becomes attractive below 116.

iShares iBoxx $ Investment Grade Corporate Bond ETF (TICKER:LQD) 

It doesn’t look like it, but corporate bonds have seen the biggest selling pressure since 2008. Every time the iShares iBoxx $ Investment Grade Corporate Bond suffered similar selling pressure, it performed very well in the future.

The monthly bar chart shows the ETF trading near the bottom of two trend channels.

The daily chart insert shows a potential ending diagonal, a technical pattern that often resolves with a spike higher. Momentum and volume suggest that strength is starting to build under the hood.

The iShares iBoxx $ Investment Grade Corporate Bond comes with a 3.30% yield.

A drop below 113.70 would be an attractive price to initiate a long position.


Investing is a game of odds. The more boxes an ETF (or index) checks, the better the odds of success. The above ETFs check a number of boxes (technicals, sentiment, seasonality, cycles, etc.), which makes them favorable choices.

How many boxes does the S&P 500 Index SPX, -0.09%  check right now? Here is an S&P 500 analysis based on a similar set of parameters (technicals, liquidity, sentiment, seasonality).

Simon Maierhofer is the founder of iSPYETF and publisher of the Profit Radar Report. He has appeared on CNBC and FOX News, and has been published in the Wall Street Journal, Barron’s, Forbes, Investors Business Daily and USA Today.

Be Sociable, Share!

Related Posts


MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.

This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.

The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The educational training program and software services are provided to improve financial understanding.

The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.