The SPDR S&P Metals and Mining ETF (XME) could be on the verge of a surprising, very powerful upside breakout after completing a 6-month corrective accumulation period.

After Trump was elected last November, the XME climbed from just under 25 to a February 2017 high at 35.21, or a whopping 41%, in anticipation of the enactment of the Trump agenda, concurrent with lower taxes, stronger economic growth, and upward pressure on inflation.

Thereafter, however, in reaction to the Administration's failure to pass health care legislation, coupled with a myriad of disappointments and political fumbles, prospects for "The Trump Trade" faded miserably.

All through the disappointment period, despite numerous downside violations of its 200-day moving average (DMA), the XME managed to find support between 30 and 28. During the last major downside breach of the 200 DMA in early August in the vicinity of 30.60, the XME bears had another opportunity (the fifth since late April) to inflict very serious technical damage to the developing corrective accumulation pattern. However, they failed to do so.

In its totality, all of the action since early March 2017 has chiseled out a rounded, "cup and handle"-type accumulation formation that is putting increasing upward pressure on resistance lodged between 32.65 and 33.43. If hurdled and sustained, this will trigger powerful upside technical potential that projects to 36+.

We added the XME to our MPTrader Model Portfolio on September 29 at 32.29. Last week, after early weakness in sympathy with the overall pressure on the major indices Thursday morning, the XME put in a key upside reversal day, and then followed through by gapping up Friday morning and closing strong at 33.15.

The 2-day upside thrust, which pivoted off the rising 20 DMA (32.49) as well as off nearest trendline support from the Sep 22 low (31.38), likely derived strength from the steel sector after the STLD upgrade to Overweight from Sector Weight, and a $44 price target (from $38) by KeyBanc last Thursday (10/19/17). In addition, Steel Dynamics management made positive comments after its recent earnings report (10/18/17) that the U.S. steel market has bottomed, and they are largely positive about the near term steel pricing. Although foreign dumping of steel and other industrial metals continues to be problematic for certain producers, it is on the radar of the Trump Administration, which continues to work towards leveling the playing field against foreign competitors who receive support from illegal subsidies.

With this latest move, XME is attempting to hurdle its 8-month resistance line, which cuts across the price axis in the vicinity of 33.20. This is the third attempt to take out the resistance line since Sep 9. Given the juxtaposition of the rising momentum indicators, a significant breakout from the larger rounded accumulation pattern likely is already in motion.

From an event-driven perspective, earnings in NUE, X, MT, FCX, ATI, CNX are due out within the next two weeks, and should provide the XME will some event-driven directional catalysts. From a market-psychology perspective, my sense is that such a move will be directly related to renewed prospects for the Trump Growth Agenda (tax cuts, tax reform), and hence, the resumption of "The Trump Trade" that propels the cyclical and industrial names to the upside (industrial miners and manufacturers included).

See chart illustrating the technicals on XME.

Mike Paulenoff is a veteran technical strategist and financial author, and host of MPTrader.com, a live trading room of his market analysis and stock trading alerts.

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