Thursday’s ETF Chart To Watch: XLB On Edge As FCX Reports

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Profit taking pressures permeated the market on Wednesday amid disappointing quarterly performance results from Bank of America (BAC). Bellwether Apple (AAPL) also dragged down the S&P 500 Index after the stock slipped below $400 a share for the first time since 2011. Corporate earnings will remain in the spotlight for the rest of this week, although weekly jobless claims may steal the show later today depending on the latest figures [Download 101 ETF Lessons Every Financial Advisor Should Learn].

Mining giant Freeport-McMoRan (FCX) is slated to report earnings later today, which brings our spotlight onto the Materials Select Sector SPDR (XLB, A) as it allocates over 6% of its total assets to the company. Analysts are expecting for the company to report earnings of 85 cents a share, compared to a year ago when the firm reported earnings of $1.57 per share [try Free ETF Stock Exposure Tool].

Chart Analysis

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Consider XLB’s one-year daily performance chart below. This ETF has enjoyed a nice steady uptrend since bottoming out in early June of 2012, and has seen a recent peak of $40.04 a share. XLB appears to have endured a healthy correction over the last month as shares have managed to hold their ground above the 200-day moving average (yellow line) as well as the $37 level; this is noteworthy because XLB previously managed to rebound off this same support level in late February of this year. As such, this ETF appears ripe for bargain buyers; however, caution should be exercised as the above-average selling volumes seen on 4/15/2013 suggest that further downside is highly probable over the coming days [see ETF Technical Trading FAQ].

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This ETF could see additional selling pressures stemming from FCX, one of its top 10 holdings, if the company posts lackluster quarterly results later today [see How To Swing Trade ETFs].

Outlook

From a technical perspective, XLB is resting on an important level which it can either rebound off or break below. If FCX posts better-than-expected earnings, XLB could have the wind at its back on the day; in terms of upside, this ETF has major resistance at $40 a share. On the other hand, selling pressures could drag XLB below its support level at $37 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.

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