I was wondering what everyone thinks about the long term prospects for XME, especially considering the Chinese steel output. At ~$16.00, it is at a historic low, so I am thinking about building a long-term position (10-15 years) in it, and also selling calls against it to lower my basis in it, especially if it continues even lower.
Normally, that time frame is long enough for just about anything to turn around; but are their structural changes that could mean the end for steel (which makes up a rather large portion of the ETF) in America?
To be honest, I would prefer to use this same strategy on something like PICK, which has a more global and diverse makeup, but the options volume is too low to sell calls.
My understanding of spikes like you show here with large price divergence, is apparently someone was desperate for some shares at a higher price and paid an ask price at a much higher price than the close because they were the only shares available at that time. I've seen it before in stocks such as GME and ATVI, and I've often wondered if something fishy was going on.
ATVI record High 47.74 in AH Trading. Record High During Regular Hours is 45.12
I've noticed it on a day right before a sell off that the pre-market prices of GME will be higher but no volume, I've never bothered to check Number of shares traded pre-market though. Then from that pre-market high and Open they will sell rapidly. I often wonder if it isn't some type of market maker price pushing in that area. Trade enough shares to get the price elevated for a good short position, and then on open immediately execute the short sell at that open price and drive the price down rapidly by filling all the orders in range. Knowing that there would be no way for price to recover, they would have nearly a risk free short position. Not that I think that has anything to do with the small volume trade made in NUGT. But if anyone has anymore information on Price Fluctions like those I have noticed in ATVI and GME I'd like to know more.
Why-do-stocks-sometimes-have-spikes-after-hours Do a Quora search and they have all kinds of responses, but mainly low volume and wide bid ask spreads.
Over the longer term it's possible, but I don't know if right now is where you would want to average down from. Short term it may rise higher but I don't look for it to set a new high until Oil Stabilizes above $50 per barrel. Below that it is not sufficient to bring Oil Rigs online and they are a big user of steel. With demand for Oil being saturated I don't see Steel or X surpasing their highs this year, and look for them to return to lower levels over the winter. I could be wrong and they continue higher from here, but I know I bought US Steel in Feb March and sold it for a good profit. I chased it buying more on the way down and it ate into those profits. I've recently bought and sold US Steel to soon so my opinion may be skewed. XME may be a safter bet than a single stock, but if you can get a deal on X like from an analyst downgrade it could be a good long term investment as well.
I would post a link, but I haven't made enough posts, so google search " Are Oil Rigs Big Consumers of Steel " to get some backstory on my opinion.
I am looking at drillers, and have a base of a position in RIG and DO on the latest downgrade. Of the Opec meeting is a bust and Oil price retreats further RIG and DO are attractive long term plays based on an Oil Recovery at some point. If Oil ever gets back to $75 a barrel these drillers will be valued 8-10 times what they are at the present. This all just an opinion and is my personal strategy for a longer term play at the moment.