Momentum Keeps Pushing This Energy ETF Higher

Up almost 80% year-to-date, the Invesco DWA Energy Momentum ETF (PXI) keeps on pushing higher as the momentum factor continues to provide the necessary tailwinds.

PXI seeks to track the investment results of the Dorsey Wright® Energy Technical Leaders Index. The underlying index is composed of at least 30 securities of companies in the energy sector that have powerful relative strength or ‘momentum’ characteristics.

Momentum can come and go in the capital markets, which makes PXI an ideal tool that traders can use to capitalize on short-term strength. For investors looking for a long-term buy and hold fund, they may want to look at the Invesco DB Energy Fund (DBE).

“This ETF offers exposure to the domestic energy market, including many of the Big Oil companies that are responsible for significant portions of global energy supply,” an ETF Database analysis said. “PXI is likely too targeted for those with a long time horizon, but this fund can potentially be useful for those implementing a sector rotation strategy or looking to overweight this corner of the market.”

Momentum has certainly pushed PXI past its 50-day moving average since fall started, riding the wave of higher oil and gas prices amid inflationary pressures. Looking at the relative strength index (RSI), however, it could be heading into oversold territory, making it an ideal entry point for technical traders.

PXI Chart

PXI data by YCharts

Stable Growth in Energy For 2022

Looking ahead to 2022, more growth looks to be had for the energy sector. Within the past year, the S&P 500 Energy Sector index has been outpacing the broad S&P 500 index by a 20% margin.

What lies ahead for 2022 is potentially more stable growth. Even if oil and gas prices subside, a number of energy companies are turning to wind and/or solar energy, which could provide additional growth opportunities as the world continuously moves towards renewables.

“The ongoing recovery in global oil demand, gradual supply growth, and a manageable cost environment will provide a supportive macro backdrop for producers to maintain earnings above 2019 levels,” Moody’s said in a report on Friday (November 19). “Many producers that did not invest sufficiently in 2020-21 will seek to boost capital budgets to stabilize production and stave off potential declines in volumes.”


^SPXNRGS data by YCharts

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