Conclusion, Investment Implications, Strategy

The SPDR S&P Metals and Mining ETF (XME) appears to be resuming its August 2020 major uptrend amid coincident quarterly relative outperformance versus the benchmark S&P 500 (SPX).  A sustained rise above the $39.66 area would help confirm this and would target an additional 18% rise to $50.00.  This is an Asbury Momentum trade idea.

Analysis and Rationale

The SPDR S&P Metals and Mining ETF (XME) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the metals and mining segment of a U.S. total market composite index. In seeking to track the performance of the S&P Metals & Mining Select Industry Index (the “index”), the fund employs a sampling strategy. It generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index. The index represents the metals and mining segment of the S&P Total Market Index (“S&P TMI”). The fund is non-diversified.

The upper panel of Chart 1 below plots XME daily since October 2020 along with its 200- and 50-day moving averages, widely-watched major and minor trend proxies.  The lower panel displays a corresponding daily relative performance chart of XME versus the benchmark S&P 500 (SPX, blue) along with its 63-day moving average (green, quarterly, our Strategic time period).

Chart 1

The rightmost green highlights in the upper panel show that XME appears to be resuming its August 2020 major uptrend, as defined by its 200-day MA, following its recent test of the 50-day MA.  Meanwhile, XME’s current trend of quarterly relative outperformance versus SPX as shown in the lower panel also appears to be resuming.  The other green highlights show that similar tests of the Strategic relative outperformance trend on Mar 25th, Jan 27th, and Oct 29th resulted in the resumption of the trends in both panels.  A sustained rise above the 50-day MA, currently situated at $39.66, would help to confirm the outright uptrend has resumed and would target an additional 18% rise to $50.00 per share. 

Table 1 below shows that considering the aforementioned upside target and a protective stop placed below the $40.39 area, a long entry price of $42.50 would provide a 1:3.6 risk/reward ratio (risking $1.00 to make $3.60) with an initial risk of 5.0%.

Table 1

 

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Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.