3 ETFs for Thanksgiving Bulls to Feast On

The Market Vectors Semiconductor ETF (SMH), the iShares 20+ Year Treasury Bond ETF (TLT), and the PowerShares Dynamic Leisure & Entertainment ETF (PEJ) have historically outperformed during Thanksgiving week

Nov 21, 2016 at 2:12 PM
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It's a short trading week on Wall Street, with U.S. markets shuttered on Thursday for Thanksgiving and closing at 1 p.m. ET on Friday. And while volume has historically been low during Thanksgiving week, there's still plenty of action to be found. Last week, for instance, Schaeffer's Senior Quantitative Analyst Rocky White drilled down on the 25 best and worst to own during the holiday week, and today, that list has been broadened to include exchange-traded funds (ETFs) that Turkey Day traders may want to feast on. Near the top of the list for outperforming ETFs are the Market Vectors Semiconductor ETF (SMH), the iShares 20+ Year Treasury Bond ETF (TLT), and the PowerShares Dynamic Leisure & Entertainment ETF (PEJ).

Best and worst Thanksgiving week sectors

Despite turning in only four Thanksgiving week performances, SMH -- which tracks the performance of semiconductor stocks -- has been positive each time, averaging a gain of 2%. True to form, chipmakers have started the week off strong, with SMH up 0.4% at $70.63, and fresh off a record high of $71.00. The Market Vectors Semiconductor ETF is now up 32.5% year-to-date, and trading north of its previous highs at $70, which could serve as a foothold going forward. Plus, although short interest on SMH dropped 8.9% in the two most recent reporting periods, it would still take more than seven sessions to cover the remaining bearish bets -- at the average pace of trading -- meaning there's sideline cash available to help fuel the ETF's fire.

smh daily since november 2015

Treasuries took big hit in the wake of Donald Trump's unexpected ascendancy to the White House, as evidenced by TLT's 7.1% decline from its Nov. 8 close at $130.09 to last Friday's settlement at $120.85. Nevertheless, the ETF found a foothold atop its year-to-date breakeven level, and was last seen up 0.3% at $121.24. If past is precedent, this positive price action could continue as the holiday-shortened week wears on, too. Over the last 10 Thanksgiving weeks, TLT has been positive nine times, gaining an average of 0.9%.

Meanwhile, in the options pits, speculative players have been eyeing more upside for the iShares 20+ Year Treasury Bond ETF -- or perhaps hedging against more volatility ahead of the mid-December Federal Open Market Committee (FOMC) policy-setting meeting. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TLT's top-heavy 10-day call/put volume ratio of 1.11 ranks in the elevated 81st annual percentile. Drilling down, the front-month December 124 call saw a notable rise in open interest over that time frame, with 30,000 contracts added.

TLT option open interest

PEJ has been positive in seven of the past 10 Thanksgiving weeks, boasting an average return of 2.7%. Against this backdrop, the ETF -- which tracks leisure and entertainment stocks, including a number of airlines -- has started the week up 0.1% to trade at $39.63, and earlier tagged an all-time peak of $39.76. Longer term, the PowerShares Dynamic Leisure & Entertainment ETF is up 4.3% year-to-date, and 7.8% year-over-year.

PEJ daily chart since november 2015

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