“Oil executives are standing by promises to protect dividend payouts from the collapse in crude prices even as they fire workers, cancel drilling projects and sell everything from oil fields to aircraft to conserve cash,” reports Bloomberg.
Still, some traders believe there is more downside to come for the sector.
“Bespoke Investment Group observes that short interest as a percent of shares available for trading, known as the “float,” has spiked for the average company in the energy sector, to 11.6 percent as of mid-October,” reports Luke Kawa for Bloomberg.
Valuations are also sitting at relatively attractive levels as well. Looking at the energy sector’s price-to-book ratio since 1990, the sector’s valuations are hovering near lows last seen during the financial downturn.
Should energy sector ETFs see more waning momentum, which is exactly was seen Tuesday, the UltraShort Oil & Gas ProShares (NYSEArca: DUG) and the Direxion Daily Energy Bear 3X Shares (NYSEArca: ERY) could prove to be winning trades. ERY attempts to deliver three times the daily inverse performance of XLE’s underlying index while DUG is a double-leveraged inverse play on the Dow Jones U.S. Oil & Gas Index.
Energy Select Sector SPDR
