The Bloomberg Gas Oil Subindex is up almost 30% for the year, signaling the strong rally in energy and encouraging investors to hop on board the bandwagon with ETFs like the Invesco Dynamic Oil & Gas Services ETF (PXJ).
The fund seeks to track the investment results of the Dynamic Oil Services Intellidex Index. The exchange traded fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.
The underlying index is composed of common stocks of U.S. companies that assist in the production, processing, and distribution of oil and gas. The fund is up a healthy 37% thus far in 2021.
“PXJ is likely too targeted for those with a long-term focus, but can be useful as a tactical overlay or as part of a sector rotation strategy,” ETF Database analysis points out. “PXJ is part of the suite of Intellidex product from PowerShares, meaning that this ETF is linked to an index designed to outperform traditional cap-weighted benchmarks. Those who believe this methodology has the potential to generate excess returns may find PXJ to be the ideal way to access this corner of the U.S. energy market.”
Stimulus Talk Is Stimulating Oil Prices
The markets in general have been feeling the positive vibes of the recent approval of a $1.9 trillion stimulus bill. Add a supply cut to oil production and things are looking fantastic. As a Reuters article notes, “oil prices rose on Tuesday on expectations of a recovery in the global economy after U.S. Senate approval of a $1.9 trillion stimulus bill and on a likely drawdown in crude oil inventory in the United States.”
“But a stronger dollar and receding fears of oil supply disruption from Saudi Arabia after an attack on its oil facilities capped price gains,” the article added.
“Fundamentals remain incredibly supportive, especially with Saudi Arabia in full control pursuing a tight oil policy,” Stephen Innes, chief global markets strategist at Axi said in a note.
“Brent is currently holding up above $68, suggesting speculators are likely dipping their toes back in after yesterday’s chaos.”
The confluence of events fits nicely into strength for PXJ. The fund has momentum on its side when looking at the one-year chart, which shows an overbought reading of 71.45 as the fund rose higher following the ‘golden cross’ back on December 14, 2020 when the 50-day moving average crossed up the 200-day moving average.
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