A Bold, Short-Term Trade Idea On Energy ETFs

Most traders and investors have been cheering the energy sector this year as the group is the best-performing segment in the S&P 500.

That fanfare has increased in recent days as the Energy Select Sector SPDR (NYSEArca: XLE) and rival energy exchange traded funds are rallying following last week’s Organization of Petroleum Exporting Countries (OPEC) meeting.

Although OPEC agreed to cut output by 32.5 million barrels per day, some traders see opportunity in energy ETFs from the short side over the near-term. Some technical analysts are concerned about the state of equity-based energy ETFs after the group has pushed higher for much of this year.

SEE MORE: Energy ETFs Rally as Russia Joins OPEC in Considering Supply Limits

“The market has moved so far, so fast. XLE was already in overbought territory prior to the week’s biggest gain in nearly six years. Investors are likely to seek a pullback before deploying new flows of capital into XLE,” according to a Seeking Alpha analysis of XLE.

The energy sector is just one of two S&P 500 sectors that currently trades at a noticeable discount to its long-term averages.