Technical indicators can be a powerful tool for investors, helping identify signals in noisy markets. While not the be-all, end-all of understanding investments, they can help show investors when a notable change has taken place – and that’s just what’s happened recently for a notable equal-weight ETF, the Alps Equal Sector Weight ETF (EQL).
EQL’s price sat at $99.4 as of mid-afternoon Monday, well above both its 50-day Simple Moving Average (SMA) and its 200-day SMA of $98.9 and $97.3 respectively. EQL’s 50-day SMA has sat above its 200-day SMA for several weeks, and with its price now above both indicators again, the ETF is showing positive signs. Though it is approaching a local resistance point, having capped around $100.6 in March, it has risen as far as about $103 this year.
Combine that momentum and buy signal with its equal-weight approach, and the strategy becomes even more intriguing. EQL gives each sector of the overall economy an equal weight in EQK’s holdings, which offers a very different view of the U.S. market landscape than available in a big-name strategy like the SPDR S&P 500 Trust ETF (SPY), for example.
See more: “How Does EQL Compare to SPY?”
Tracking the NYSE Select Sector Equal Weight Index and investing as an ETF of ETFs fund, EQL manages solid share volume in part thanks to the liquidity of its underlying holdings. EQL weights areas as varied as technology and utilities around about 9% in its portfolio, returning 4.6% YTD according to YCharts and adding $23 million in net inflows over the last three months.
Charging 26 basis points (bps), EQL could also help mitigate volatility, a concern that is certainly still present in markets following the bank crisis scare last month. With commercial real estate now under the microscope, and the Fed’s campaign against inflation showing no sign of slowing down, weighting assets equally across the market could provide needed ballast if areas like financials or technology take big hits this year.
The strengths of EQL’s equal-weight approach already boost its case to make ETF investors’ shortlists, but with the ETF also signaling a buy, it may well be worth taking a close look. For those looking for a strategy that can deal with volatility and turmoil while offering robust equities exposures, EQL could be one to watch.
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