I don’t trade most ETF’s very actively. A few of them I’ll day trade (SPY, IWM, QQQ), but many others I’d just rather not be real active in them. That doesn’t mean they don’t have potential though, so what I’ll typically do instead is to trade them via longer-term accounts (in this case IRA) as position trades.
One setup I’m looking at right now is XME, which is the Metals & Mining ETF. It’s been moving somewhat constructively since bottoming in October, and over the last two months it has pulled back quietly to base in a wedge-like pattern. During that time we’ve seen both lower highs and higher lows established. A push through the white trend line would take place around $52.20, and could see this sector ETF working its way back up toward higher levels which it previously respected as either support or resistance over the past year.
My plan is to get long if it crosses the trend line, and I’ll be looking for a position trade over the coming months here (hence I will not frequently be updating this trade). Gap risk is greatly reduced since it’s an ETF, so I don’t mind the longer holding time. I’ll look to stop out if it closes under $47, but otherwise will be looking for an eventual advance back toward the $72 area from July. I also expect to sell calls on rallies in order to collect some premium if/when the stock becomes a bit short-term extended.
Here’s a closer look at the chart of XME outlining the recent higher lows as well as some upside levels I think the stock could be heading toward if it clears the descending trend line with a push through $52.20:
Just wanted to share this chart with you and my plan for this IRA trade.
