While most sectors are cheering the latest record run-ups in the major indexes, the energy sector has had little to celebrate this year as it’s languished for the majority of 2019 with single-digit gains. With a recent uptick in oil prices thanks to bullish data from the Energy Information Administration, is this a sign that it’s time to buy the dip in energy?
“S&P 500 energy stocks, tracked in part by the Energy Select Sector SPDR Fund (XLE), have charged 3% higher in the last week, a somewhat encouraging sign of life for a group that’s up just 6% for the year, well off the S&P’s nearly 27.5% gain,” a CNBC report noted.
“The energy sector is really one of the few places that we can find persistent long-term downtrends, both in absolute and relative terms, within the broader market,” said Katie Stockton, founder and managing partner at Fairlead Strategies a CNBC “Trading Nation” episode. “That is obviously a check against it,” she said, even as investors “can argue for a loss of long-term downside momentum. That is definitely evident.”
Nonetheless, this could be a sign for investors to start adding exposure to energy if they haven’t already—or is it?
“We have seen some stabilization, in relative terms, for certain [energy]stocks or segments, but I think it’s a little bit too early to suggest that we’re seeing a meaningful long-term turnaround,” she said. “We’re not really getting a lot of breakouts on this move, but what I think we can attribute it to, in part, is the fact that crude oil, or WTI, climbed above very key resistance around $60 per barrel.”
Whether long or short, traders can reap the benefits on both sides. Funds to consider are the Direxion Daily Energy Bull 3X Shares (NYSEArca: ERX) for bullish plays and the Direxion Daily Energy Bear 3X Shares (ERY) for bearish opportunities should they arise.
- ERX seeks daily investment results equal to 300% of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services.
- On the other end of the spectrum, ERY seeks daily investment results that equate to 300% of the inverse of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services.
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