ETF Trends
ETF Trends

Already up 24.6% year-to-date, the steel exchange traded fund (ETF) has been going strong.

But analysts see a weakening ahead that’s some investors wondering if they should keep their eye on this material or look away. While Van Eck Market Vectors Steel (SLX) built up 66% over the past 12 months, but it’s been giving up some ground since it hit a new high on May 19, reports John Spence for MarketWatch. Since then, it’s lost 5.7%.

Since its launch in 2006, the ETF has more than doubled in value and has $350 million in assets. Demand for steel has been backed by development in emerging countries such as China. On the flip side, though, is that steel has become so pricey that some projects are being scaled back or delayed both at home and around the globe.

Steel demand can go through crazy swings, so volatility is common. This can also create buying opportunities if you watch the ETF close enough. To protect yourself, get out if the fund drops below its trend line (200-day moving average) or 8% off its high, whichever comes first.

Top holdings within the ETF and their percentage weightings in the fund:

  • Arcelor Mittal (MT.AS) 14.1%
  • Rio Tinto (RTP) 14.5%
  • US Steel (X) 4%
  • Nucor (NUE) 4.6%

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.