Conclusion, Investment Implications, Strategy

The SPDR S&P Metals and Mining ETF (XME) is resuming its August 2020 Strategic advance amid recent Tactical (monthly) asset expansion. A sustained rise above the 44.85 area would confirm this and target an additional 18% rise to 53.20.  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 green highlights in Chart 1 below show that XME is currently breaking out higher from 3 1/2 months of sideways investor indecision.  This suggests its larger August 2020 Strategic advance is resuming and targets an additional 18% rise to 53.20 that will remain valid as long as the upper boundary of the indecision area, currently at 44.85, now contains as underlying support.

Chart 1

Chart 2 below plots XME daily since April with its 200-day moving average (major trend proxy) in the upper panel, with a corresponding chart of the daily total net assets invested in XME and their 21-day (one business month, our Tactical time period) moving average in the lower panel.

Chart 2

The green highlights show that these assets began a new trend of Tactical expansion on Oct 7th, just as XME was testing and rising from its 200-day MA as major support.  This chart indicates bullish conviction that prices are headed higher.

Table 1 below shows that considering the aforementioned upside target of 53.20 and a protective stop placed below the 42.79 area, a long entry price of 45.05 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.