Spdr S&P Metals & Mining
Spdr S&P Metals & Mining
IBD Stock Analysis
- Back above a 38.09 buy point after testing key support
- Relative strength line near high
- Avoids company-specific risk, but still volatile
Industry Group Ranking
* Not real-time data. All data shown was captured at 1:07PM EDT on 03/26/2021.
The SPDR S&P Metals & Mining ETF (XME), an exchange traded fund that tracks an array of U.S. mining stocks and metals stocks, is the IBD Stock of the Day. The ETF is in a buy zone and was added to SwingTrader on Friday.
The gains for the ETF and other mining stocks come with a broader economic rebound from the coronavirus pandemic. As the economy reopens, some investors are betting demand for metal materials, and demand for more such materials to be mined from the earth, will recover with it.
“Commodity markets have strengthened as the outlook for demand is improving and supply constraints are increasing,” Jefferies mining stocks analysts said in a research note last month.
XME Sets Up, As Mining Stocks Move Higher
The SPDR S&P Metals & Mining ETF rallied 5% to 39.34 in the stock market today. The stock is back above a 38.09 entry of a cup base as well as its 21-day exponential moving average. The XME ETF originally broke out in late February, but quickly retreated before running up again to 41.98 on March 18. Shares then tumbled again, slipping below the 50-day line on Thursday before closing higher.
The ETF’s relative strength line, which compares its performance to the S&P 500, has moved higher since November. Investing in an ETF provides a way to play an entire industry, cushioning against some of the volatility and risk that comes with investing in individual companies. But there is no question that XME is volatile.
Mining stocks like Alcoa (AA), Coeur Mining (CDE) and Freeport-McMoRan (FCX) are among the fund’s holdings. Other stocks in the ETF include U.S. Steel (X), Steel Dynamics (STLD) and Royal Gold (RGLD).
Commodity prices for things like iron ore and nickel stood at multiyear highs earlier this year, an IBD story from January noted. Demand from China, government stimulus efforts and a weak dollar helped prop up those prices.
Prospects Rise On Infrastructure Plans
Mining stocks have also been buoyed by prospects for more U.S. infrastructure spending — raising demand for steel and the iron ore used to make it — as well as the possibility for more trade tension between the U.S. and China. Copper is a critical industrial metal. It’s also used significantly in electric vehicles and solar power.
Supply has remained tight as steel demand in the U.S. — for things like cars — accelerates. The pandemic, and a 2019 disaster at a Vale mine in Brazil, have raised concerns about the ability to mine materials safely at all.
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