Long term idea: The Heavy Stuff

07/20/2022

Looking to play defense?

Choosing the right stocks and ETFs for your portfolio is tough at the moment considering the somewhat randomized market-wide selloffs.

Of course, one area that tends to play well in down markets is metal…

 

(Source: giphy.com)
Alright, that’s enough. Not that kind of metal.

But supply shortages will continue in the days to come, particularly in the commodity space…

If you’re browsing for long term bets with some defense, it’s worth keeping the SPDR S&P Metals & Mining ETF (XME) on your list:

Swing trade entries — for me, at least — require zooming in, which is why we’re on the 65-minute chart.

There’s nothing wrong with simply hitting the buy button based on the daily chart or more traditional time frames, but it’s just not my style and I prefer to key in on specific buy zones…

With a recession being the likely scenario, I dig XME.

The Support and Resistance channels tell us that this is a prime trading range for XME and you can see this in the first half of the chart.

This could potentially be the range again if XME doesn’t break out here.

A “safer” bet is to look for the move above the Resistance channel close to ~$48.00…

But a retracement upward to the 61.8% on the Fibonacci Retracement for longer term holds is a bullish sign, so long as it holds the level.

But you have to give it some room to breathe.

On to the lower chart…

Chris Hood’s Squeeze Trading Tool 1.2A has proved invaluable over the last year and I’m a true convert.

Right now, the tool is backtesting XME at a 60% win rate and 1.33 profit factor with zero consideration for other indicators or factors.

(Click here to learn how he uses it.)

Note that the histogram is curving to the upside from the recent bottom at Support with a rising Stochastic that has now flipped green…

The magnitude of the likely move higher remains to be seen.

I’ve drawn in white dotted trendlines to show the slight converging of the histogram and the white dots are showing the beginning of a squeeze.

The same goes for the composite Stochastic line on the Squeeze 4-Pack v8 which is a simplified way to use the tool on the 5, 10, 15, and 20 periods.

Here’s what I like: The 5, 10, and 15 periods are all green with the 20 yet to convert…

Early entry? That depends on your risk tolerance…

The bearishness lies in the crossing down of the 55ema over the 200ema a couple of days ago, although this could flip quickly.

Considering the market environment, this will pay off sooner than later, but patience and confirmation are key…

Keep moving,
(Disclosure: I hold no position in XME but intend to initiate a position in the next 30 days.)

This material is not an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Any performance results discussed herein represent past performance, not a guarantee of future performance, and are not indicative of any specific investment. Due to the timing of information presented, investment performance may be adjusted after the publication of this report. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance levels or be suitable for your portfolio.

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