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VFH Has Been Trading below Moving Averages since December 31, and It Matters

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Overview of VFH

The Vanguard Financials ETF (VFH) seeks to track the performance of the MSCI US Investable Market Financials 25/50 Index. As of February 5, 2016, VFH had a market capitalization of $2.9 billion, making it the second-largest financial ETF after the Financial Select Sector SDPR ETF (XLF). On average, VFH sees $6.2 million worth of shares trade hands every day. It has an expense ratio of 0.12%.

VFH’s largest holdings are Wells Fargo & Company (WFC), J.P. Morgan Chase & Company (JPM), Bank of America (BAC), and Citigroup (C). These firms have weights of 6.9%, 6.3%, 4.6%, and 4.3%, respectively, in VFH.

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Moving average analysis

On February 5, VFH closed at $42.85, which was below its 100-day, 50-day and 20-day moving averages of $47.53, $46.79, and $43.67, respectively. Currently, VFH is trading 11% below its 100-day moving average, 9% below its 50-day moving average, and 2% below its 20-day moving average.

The chart above shows that VFH broke below its 20-day moving average on December 31 and has been trending downward since.

RSI

The 14-day RSI (relative strength index) for VFH was 37.2 as on February 5. This suggests the stock is approaching oversold levels and may be considered undervalued. An RSI figure below 30 is an indication of an oversold stock while an RSI above 70 denotes an overbought stock.

Continue to the next part for a look at VFH’s fund flows in 2016.

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