Time to Cruise With the Auto ETF

ETF Trends

The First Trust NASDAQ Global Auto Index Fund (CARZ) is trading higher by nearly 1% Wednesday on volume that is more than 62% above the daily average. Upside for CARZ comes a day after data showed U.S. auto sales jumped 6% to 1.5 million vehicles last month.

March auto sales data are sign as an encouraging sign after the industry struggled through the first two months of the year due to harsh weather in the Midwest and Northeast. Some analysts even called January auto sales data a disaster. [Blizzard Pressures Some Sector ETFs]

Despite a trying first quarter, CARZ is up nearly 5% year-to-date and currently resides less than 50 cents below its 52-week high. The timing looks right to give the $60.3 million ETF another look.

“ Auto and related auto part equities have a history of moving higher from March 3 to May 3. Average return per period during the past 20 periods was 9.0 per cent. The trade is triggered when consumers start to enter the auto showrooms early in March following much publicized auto shows in January and February when new models and innovations are displayed,” write Don and Jon Vialoux for the Globe and Mail.

Up 4.1% since March 3, CARZ is obeying seasonal strength for the auto industry.  The ETF’s recent strength is impressive for another reason: Its exposure to Japan.

On the surface, the first-quarter performance delivered by CARZ does not look overly impressive, but combine bad weather in the U.S. with the ETF’s 33.3% weight to Japan, by far the ETF’s largest country weight, and CARZ looks solid. That is especially true when considering the yen’s rise as a flight to safety play left some Japan ETFs ranked among the first quarter’s worst performers. [First Quarter's Worst ETFs]

“Investors looking for a seasonal trade will want to see improving technical signs before entering. A move above US$40.68 will attract technical buying,” according to the Globe and Mail.

First Trust NASDAQ Global Auto Index Fund

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ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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