Resources Still in Play
02/02/2007 12:00 am EST
Another resource admirer, exchange-traded fund pro Doug Fabian, heads to the energy and gold markets for his latest recommendations to subscribers, adding two ETFs to take advantage of recent price moves in these sectors...
"Oil prices recently climbed more than $1 on one trading day alone, above $55 a barrel. Concerns that producers were complying with OPEC's production, as well as expectations of continued cold weather in the northeast pushed the price of crude off higher.
"Because of this reversal of fortune in oil I am now recommending that you buy the Energy Select Sector SPDR (XLE AMEX) with 12.5% of your total portfolio. We've used this energy sector ETF in the past to help bolster our portfolio returns, and with the resurgence in oil prices in general and energy stocks in particular I think we're likely to get another nice move higher soon.
"I also want you to add to your gold position, but not via our current position in the streetTRACKS Gold (GLD). This gold move involves stocks with a close relationship to the fortunes of the yellow metal. The fund I am recommending you b uy now is the Market Vectors Gold Miners (GDX AMEX) with 12.5% of your total portfolio. This ETF contains the top gold and precious metals mining stocks, and it generally performs well when gold prices are on the rise.
"Gold mining stocks are generally more volatile than actual gold prices, but this volatility means that you can capture some nice profits when gold mining stocks go on a big run. With GDX now trading well above its support level of $36, this fund may just be ready to make one of those big runs. If you want to be a bit more conservative with your gold allocations, you can always add the additional 12.5% to GLD instead of GDX.
"Once we establish our purchase prices, we will determine our stop loss points and post them at Fabian.com. And speaking of stop loss points, we have adjusted our stop loss in the iShares Japan (EWJ AMEX), moving it up slightly to $13.50. We want to make sure we lock in gains in this position and moving up our stop as the fund rises will insure a safe exit point. We have also established our stop loss point in the Health Care Select Sector SPDR (XLV AMEX). We will now exit this ETF if it falls below $32.50."