It is hard not to watch FRAK (Market Vectors Unconventional Oil & Gas, Expense Ratio 0.54%) given its peculiar moves lately, catching a strong bid now two sessions in a row despite continued pressure on Crude Oil the commodity itself.
The fund has actually net attracted assets year to date, adding about $32 million in spite of continued price pressure in the space, not counting the past two days.
Top holdings of the fund include a number of names that most should be familiar with in the Integrated Oil & Gas space, like OXY (>8.92%), EOG (8.19%), APC (8.17%), DVN (5.66%), and HES (5.64%). In all, the fund contains sixty eight individual names in the “Unconventional Oil & Gas” space, with more than 54% of the index residing across the top ten holdings.
It is also worth pointing out the fund’s 77% slant to the U.S. with the remaining 23% of the portfolio being invested in companies in the space that are domiciled in Canada. According to fund literature, the underlying index is a “rules-based index intended to track the overall performance of the unconventional oil and gas segment, defined as coalbed methane (CBM), coal seam gas (CSG), shale oil, shale gas, tight natural gas, tight oil, and tight sands.”
For those not intimately familiar with this kind of language, in simple terms these are the “Fracking” companies that are ultimately as they have proven, very sensitive to the cost of Crude Oil per barrel especially when it is falling. This correlation is not holding however in the past two days, with FRAK rallying hard (up >8% from its most recent intraday and all-time low of $19.70) on heavier volume in the fund itself, and within the greater Oil and Gas Equity space in general and throughout ETFs where we would expect the ripple to touch (i.e. as mainstream as XLE, VDE, IYE, and OIH, or as esoteric as say FXN, XES, FENY, PSCE, or ENY for example.
With FRAK trading well both its 200 day MA ($30.07) and its 50 day most recently after the December blitz downward ($25.04), we will have to see if the relative strength in the past two days in the fund via its individual holdings and related stocks in the greater Oil and Gas segment holds, or if this is merely a dead cat bounce perhaps coupled with a short squeeze.