Market Overview

Energy ETFs Continue to Underperform (USO, UGA, UNG)

The price for a barrel of oil fell below the century mark for the first time since July on Monday and has remained there into Tuesday.

A combination of lowered concerns about tensions in the Middle East and increasing supply in the U.S. have led to declining prices.

The fall in the price of black gold has had a direct affect on the ETFs that track the energy prices.

Oil is not alone, both natural gas and gasoline ETFs have suffered losses as the stock market hits new all-time highs.

United States Oil Fund (NYSE: USO)

The ETF tracks the daily movement of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The recent selling has sent the ETF to the lowest price since the first week of July and it is now off nearly 10 percent from the 2013 high set in September. The glimmer of hope for the ETF is the overwhelming support on the chart near the $35 area.

With the ETF within two percent of the support it could be time for investors to give oil a look at a buying opportunity on the pullback. The key to this trade would be a tight stop-loss in the even support is breached.

United States Gasoline Fund (NYSE: UGA)

The ETF tracks the daily movement of the spot price of the gasoline futures. The action in UGA has been similar to USO in the last two months, as it has fallen 10 percent from the late August high.

The ETF is also coming close to a support level near $54, but remains five percent above that level. With the summer driving season over there is still the possibility the holiday season could see a pickup in demand for gas in the coming months.

United States Natural Gas Fund (NYSE: UNG)

The ETF tracks the daily movement of the spot price of natural gas delivered at the Henry Hub in Louisiana. The chart of UNG varies from the first two ETFs, but in the last week the selling has spread to natural gas.

Whereas the long-term chart for oil and gasoline remain bullish, natural gas has been in a severe downtrend for years. The choppiness of the chart and the long-term trend should be enough to keep investors away from the commodity.

Of the three energy commodities, USO has the most attractive chart for a potential rebound in the coming weeks. That being, said it is a contrarian play considering the majority of sectors are breaking out to new highs. Move ahead with caution on all energy related ETFs.

Posted-In: energySector ETFs Specialty ETFs Commodities Markets Trading Ideas ETFs Best of Benzinga

 

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