We have been speaking about the recent impressive leg up in Crude Oil, on very heavy volume in related ETPs in the space, but there is a bit of a pullback ensuing early in today’s session.
In any case, Energy related equities have seen bids recently as well, and yesterday upside call buying in XLE (SPDR Energy Select Sector, Expense Ratio 0.15%) caught our attention, specifically involving June 84 strikes. XLE in fact closed above $80 yesterday before regressing a bit in the early going this morning and trading down to a $78 handle again, but the fund still remains above its 50 day MA at the moment for the first time since late November of last year.
In addition to upside call buying in XLE, there have been inflows in XLE lately topping $540 million, keeping in mind that the fund has an asset base of about $12.2 billion. Top holdings in XLE are XOM (>16.6%) and CVX (>13.6%), and it is noteworthy that more than two holdings make up greater than 30% in the underlying portfolio.
On January 23rd in this piece we noted XOM in terms of its early February quarterly earnings release which occurred already and has helped spike the stock higher as well as other ETFs that have considerable weightings to XOM.
Given the inflows and upside call buying, ERX (Direxion Daily Energy Bull 3X, Expense Ratio 0.95%) has to stay on our immediate radar here because the fund tracks the same underlying index as XLE, just with the daily leverage component to factor in.
This fund has impressively reeled in >$200 million just year to date, giving it north of $526 million in assets under management overall currently. DIG (ProShares Ultra Oil & Gas, Expense Ratio 0.95%) grants two times daily leverage via the Dow Jones U.S. Oil & Gas Index and the fund is considerably smaller than ERX currently with about $171 million in assets under management but may also be active in the short term given the long interest in the sector.