Time To Buy ETFs Officially In A Bear Market

by: Benzinga

Summary

A correction is typically considered a 10 percent pullback in the price of the asset or index.

Two ETFs in particular are in niche sectors that could be considered cutting-edge, as they deal with technologies that are still emerging.

A recent downgrade of several Chinese solar stocks by Credit Suisse put pressure on the sector.

By Matthew McCall

The loose definition of a bear market is a 20 percent move to the downside. A correction is typically considered a 10 percent pullback in the price of the asset or index. The S&P 500 has not come close to either situation recently, and has not had a 10 percent pullback in over two years. The same cannot be said of a handful of ETFs that have been hurt by the selling of the high-flying technology and momentum stocks.

Two ETFs in particular are in niche sectors that could be considered cutting-edge, as they deal with technologies that are still emerging. After big pullbacks, it may be time to start considering buying into the ETFs below as long-term investments.

The Global X Social Media ETF (NASDAQ:SOCL) is a basket of 27 stocks that are in some way tied to the social media space, either through social networking, file shares, or other web-based applications.

The top holdings are Tencent Holding (OTCPK:TCEHY), Facebook (NASDAQ:FB), LinkedIn (NYSE:LNKD), Sina Corp (NASDAQ:SINA), and Zynga (ZNGA). Both Tencent Holdings and SINA are based in China, with the other three headquartered in the U.S.

The ETF is down 26 percent from a March 6 high, and this week hit the lowest level since last July. The selling comes after a strong 2013 where the ETF was up 64 percent. Technically, the ETF does not have strong support in the current area, but the rapid sell-off has caused it to be oversold in the near-term.

See also: Municipal Bond and Emerging Market ETFs Lead Fixed-Income Peers

Earnings this week from the sixth largest holding, Twitter (NYSE:TWTR), could be enough to help push the entire sector higher. Longer-term the sector appears to have a strong future, however, there will be winners and losers, and the ETF can help give exposure to the entire sector.

The Guggenheim Solar ETF (NYSEARCA:TAN) was down as much as 23 percent from its March high; it was attempting to bounce back in the last two weeks. The basket of 30 stocks has 42 percent of its assets in the U.S., followed by 25 percent in China and 16 percent Hong Kong. The top three holdings include First Solar (NASDAQ:FSLR), SunEdison (NYSE:SUNE), and GT Advanced Technologies (GTAT).

A recent downgrade of several Chinese solar stocks by Credit Suisse put pressure on the sector, however, several other analysts have been coming out with bullish calls on the sector.

As the price to implement solar for commercial and residential use continues to fall, the technology will see an increased demand. Add that to the rising cost of traditional energy, and the long-term outlook for the sector is bright (pun intended).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.