The third quarter saw the energy sector surge, outpacing the majority of the S&P 500 while also benefiting energy bulls. However, a more recent pullback could offer opportunities for bears.
High oil prices are providing the catalyst for the energy sector. Thanks to a combination of low supply and increased demand during summertime travel/vacation season, high oil prices have been giving way to pain at the pump.
“Energy stocks saw the most growth of any sector in the S&P 500 during the third quarter with an 11.33% change,” Investopedia confirmed. “This massive growth comes amid a surge in the price of oil driven by a historically low supply.”
Of course, those who were bullish on the energy sector in Q3 reaped the benefits.
“Energy stocks made up the top six best-performing stocks of the S&P 500 in the third quarter of 2023,” the article added.
If further strength is ahead, traders may want to look at the Direxion Daily Energy Bull 3X Shares (ERX). The fund seeks daily investment results equal to 200% of the daily performance of the Energy Select Sector Index, which is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector, which includes the following industries: oil, gas, consumable fuels, and energy equipment and services.
Alternatively, another play to consider is the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH) for continued bullishness on gas prices. The fund seeks daily investment results of 200% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
Energy Pullback for the Bears
Given the strong Q3, the forces of market gravity are taking over and oil prices have been retreating as of late. This is a boon for consumers when it comes to gas prices, but also for bearish traders in energy and oil/gas.
“One, this is somewhat of a tailwind for the economy. For parts of it outside of the energy sector, people will have more to spend. I mean, that’s just a simple fact,” said Investor’s Business Daily News editor Ed Carson. “They’ll have a little bit more money to spend at the pump.”
That said, traders can take the opposite sides of ERX and GUSH. This is made possible via inverse ETFs using the Direxion Daily Energy Bear 2X Shares (ERY) and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (DRIP).
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