Check Out The Chart: A Mountain To Climb For This Materials ETF

One of the most prominent themes of the market's May-June swoon, the last few days not withstanding, has been the ferocity with which materials stocks have been drubbed. Concerns about global economic growth have a tendency to do that to sectors that are highly levered to the growth theme. Today's “Check Out The Chart” segment features a well-known ETF that has been anything but immune to the recent materials shellacking, the iShares Dow Jones U.S. Basic Materials Sector Index Fund IYM. IYM tumbled about 12% from early May through the beginning of this week, but a couple of decent days have erased part of that loss. Still, the chart is not attractive, at least not yet. IYM, which is home to stocks such as Dow component DuPont DD and Freeport McMoRan FCX, the largest U.S. copper producer, just to name a pair, made a double top just below $85 in early May before beginning its descent. Unfortunately, that has led to a lower high, a lower low and an obvious downward channel that means before IYM can even think about addressing that resistance at $85, it is going to have to conquer resistance around $79. So from the current level of $77 and some change and with support firm around $75, IYM may not offer much in the way of near-term upside. For the fans of point-and-figure charts, the same cannot be said of IYM's downside because that chart indicates a move to $69 is possible. Now that would actually be a great entry into IYM. Assuming that doesn't happen and let's hope it doesn't because it probably means the S&P 500 will be flirting with or below 1250, a small position could be started above $79. For the extremely bullish (and patient) among us, if the S&P 500 sees 1,450 by year-end, that could carry IYM into low 90s, a move that is realistic with this high-beta fund. For now, the chart just isn't that inviting. Check it out.