The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy ETF, is lower by nearly 6% over the past week. Some traders are betting on more weakness for the benchmark energy fund.

The trade war with China is intensifying pressure on oil prices and energy stocks, and some analysts believe oil supplies are trending higher. Looking ahead, Citigroup and JPMorgan Chase analysts project global supply will expand roughly one million barrels per day more than total demand in 2020, contributing to a surplus each quarter of next year.

The expected global supply glut is also the latest threat to the Organization of the Petroleum Exporting Countries and other producers, which have already enacted production caps in an attempt to stabilize prices and balance the market.

“It’s a bearish trend and a poor risk-reward,” said Ari Wald, head of technical analysis at Oppenheimer, on CNBC’s “Trading Nation” on Monday. “The sector has just not been rewarded when oil rises to the same degree it’s been slammed when oil falls.”

XLE’s Other Trading Issues

XLE’s recent woes have the ETF trading below its 50- and 200-day moving averages, giving short-term traders little reason to approach the fund from the long side. XLE hasn’t closed above its 200-day line since late April.

Some of the big names in XLE, notably Dow component Exxon Mobil (NYSE: XOM) are not looking healthy, either.

Related: Why Trade Wars Are Plaguing Oil ETFs

“Exxon Mobil [is]turning lower from the bearish slope of its 200-day moving average. We define that as a resumption of the downtrend,” said Wald in the CNBC interview. “When you’ve got the biggest stock in the sector acting as that headwind in what is a broad list of bearish trends in this sector, we recommend underweight, avoiding, stay away from energy.”

Aggressive traders looking to bet on further declines for the energy sector may want to consider the Direxion Daily Energy Bear 3X Shares (NYSEArca: ERY). ERY seeks daily investment results equal to 300% of the inverse of the daily performance of the Energy Select Sector Index, the same index XLE tracks.

For more information on the energy sector, visit our energy category.

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