For investors seeking momentum, PowerShares S&P MidCap Low Volatility ETF (XMLV) is probably on radar now. The fund just hit a 52-week high, which more than doubled from its 52-week low price of $18.02/share.

But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed:

XMLV in Focus    

XMLV tracks the S&P MidCap 400 Low Volatility Index with a focus on the financial sector (about 50% of the total weight). Utilities, Industrials and Materials occupy the next three spots. XMLV charges investors 25 basis points a year in fees and has top holdings in RenaissanceRe Holdings, American Financial Group and Endurance Specialty Holdings Ltd (see all mid-cap ETFs here).

Why the Move?

The U.S. market is gaining strength lately. As a result, the Fed is apparently preparing for a rate hike which in turn may cause volatility levels to spike. Due to this, a look at mid-cap low volatility ETFs seem justified. Mid caps have mostly been overlooked investing options. These securities with the middle-of-the path approach are viewed as big and safe compared with the highly volatile small cap exposure.

Yes, when compared to the stability of the large caps these are relatively risky, but the recent gains in the greenback on further Fed tightening speculation have made mid-cap low volatility ETFs superior to large caps. Higher greenback normally makes large caps losers due to their greater foreign exposure. All these factors drove XMLV to hit a 52-week high yesterday.

More Gains Ahead?

The fund has a positive weighted alpha of 16.30. A positive weighted alpha hints at more gains. Also, the fund’s major focus, the financial sector, is expected to outperform ahead if the rates rise.

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