BMO Canadian ETF Dashboard

— as of July 31, 2019 —

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Metals for a Good Time, Not a Long Time

Keith Richards

Metals for a Good Time, Not a Long Time

Snapshot
The combination of a potential economic slowdown in the U.S. and a strong US dollar has beaten the base metals sector to extreme levels. The sector looks ripe for a contrarian oversold rally. As such, investors can add a metals component to their portfolios through direct commodities exposure or a mining/producer ETF, such as ZMT.

Details
BMO Equal Weight Global Base Metals Hedged to CAD Index ETF (Ticker: ZMT)

Benefits
Short-term returns. Hedge against broad market underperformance.

Trade Idea – Buy the Dip
Excessive pessimism on the macro side has driven commodities and miners/producers to unsustainable levels. You can buy into the base metals sector via two types of ETFs: base metals mining/producers, such as ZMT, and direct commodity exposure, such as Invesco DB Based Metals Fund (Ticker: DBB). You can also pick up leading metals within the Index, such as copper or individual names within the sector.

At ValueTrend, we have been long ZMT for several weeks, given that it looks to have bounced off of support at $40. Oversold securities tend to bounce off of support – creating an ideal opportunity for those who appreciate a contrarian short-term play. Investors should remember this is a relatively short-term trade, not a long-term investment. As such, we anticipate a sell point for ZMT as it reaches or goes over $46 per share. We look for $48 as the upper limit of our sell target.

Obviously, this is not a trade that would appeal to conservative investors. Risk of support not holding onto both of these positions is present. With that in mind, a tight stop loss strategy should be in place, if support is broken by more than a few days. 

Keith-Richards-July-2019-Graph.png#asset:2938
Source: stockcharts.com

Outlook
For ZMT, the safest side of the trade is under $48. I am not implying that ZMT cannot go higher. If the strong economy holds up and China trade concerns are resolved, there is room for the rally to extend beyond our target. However, this particular trade is quick and dirty. We bought ZMT a few months ago, sold at $46.50, bought it back at $41 – now we are looking to sell it after another 5% to 8% gain.  

Keith Richards

Metals for a Good Time, Not a Long Time

Snapshot
The combination of a potential economic slowdown in the U.S. and a strong US dollar has beaten the base metals sector to extreme levels. The sector looks ripe for a contrarian oversold rally. As such, investors can add a metals component to their portfolios through direct commodities exposure or a mining/producer ETF, such as ZMT.

Details
BMO Equal Weight Global Base Metals Hedged to CAD Index ETF (Ticker: ZMT)

Benefits
Short-term returns. Hedge against broad market underperformance.

Trade Idea – Buy the Dip
Excessive pessimism on the macro side has driven commodities and miners/producers to unsustainable levels. You can buy into the base metals sector via two types of ETFs: base metals mining/producers, such as ZMT, and direct commodity exposure, such as Invesco DB Based Metals Fund (Ticker: DBB). You can also pick up leading metals within the Index, such as copper or individual names within the sector.

At ValueTrend, we have been long ZMT for several weeks, given that it looks to have bounced off of support at $40. Oversold securities tend to bounce off of support – creating an ideal opportunity for those who appreciate a contrarian short-term play. Investors should remember this is a relatively short-term trade, not a long-term investment. As such, we anticipate a sell point for ZMT as it reaches or goes over $46 per share. We look for $48 as the upper limit of our sell target.

Obviously, this is not a trade that would appeal to conservative investors. Risk of support not holding onto both of these positions is present. With that in mind, a tight stop loss strategy should be in place, if support is broken by more than a few days. 

Keith-Richards-July-2019-Graph.png#asset:2938
Source: stockcharts.com

Outlook
For ZMT, the safest side of the trade is under $48. I am not implying that ZMT cannot go higher. If the strong economy holds up and China trade concerns are resolved, there is room for the rally to extend beyond our target. However, this particular trade is quick and dirty. We bought ZMT a few months ago, sold at $46.50, bought it back at $41 – now we are looking to sell it after another 5% to 8% gain.