fbpx
QQQ
-4.09
344.69
-1.2%
DIA
+ 0.75
336.04
+ 0.22%
SPY
-1.28
414.14
-0.31%
TLT
-0.44
138.92
-0.32%
GLD
-0.73
164.15
-0.45%

This Energy ETF Could Finally Be Perking Up

August 22, 2019 10:14 am
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More
This Energy ETF Could Finally Be Perking Up

Energy is the worst-performing sector in the S&P 500 this year, but there are inklings, however modest they may be, that the group is poised to bounce back.

What Happened

One example of an inkling is the 2.70% gain this week for the Energy Select Sector Index (IXETR). That's not much measured against an 8% month-to-date decline, but rebounds have to start somewhere and if the Direxion Daily Energy Bull 3X Shares (NYSE:ERX) is an accurate gauge, some traders are betting on a rally for traditional oil names.

The bullish ERX is designed to deliver triple the daily returns of the Energy Select Sector Index. As such, that leveraged ETF is up more than 8% this week.

Why It's Important

While leveraged oil ETFs have a way of vexing traders, the funds remain popular with the risk-tolerant crowd and that is true of ERX. For the 10 days ending Tuesday, Aug. 20, traders put nearly $40 million into ERX, a total surpassed by just four other of Direxion's leveraged ETFs, according to issuer data.

When betting on ERX, traders are essentially making short-term bets on Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX). The two largest U.S. oil companies combine for nearly 43% of the index that ERX delivers triple the daily returns of. Indicating that there might be something to this recent rally in ERX, analysts have been getting positive on Exxon and Chevron.

In a note out Tuesday, BMO analyst Daniel Boy sounded bullish on the two oil majors and that follows a Barclays note out last week where an analyst chatted up Chevron.

“Chevron is well positioned to both return significant free cash flow to shareholders and fund its…compound annual growth rate guidance,” according to the bank.

What's Next

Hopefully, higher oil prices are what's next for those long ERX. Or, at the very least, reduced commentary about a recession and/or some data indicating global oil demand could perk up. If ERX can clear $17, it has upside to $18 to $20 over the near-term.

Related Links

An Excellent Esports ETF

Another Cannabis ETF Is On The Way


Related Articles

An Eventful Energy Week Looms For These ETFs

Benzinga's Bulls And Bears Of The Week: Apple, Chevron, GM, GE, Peloton And More

Benzinga has examined the prospects for many investor favorite stocks over the past week. The past week's bullish calls included the iPhone maker, Google's parent and an automotive leader. read more

Think The Energy Sector Can't Get Any Worse? This Leveraged ETF Is For You

Even with the benefit of some recent upside, the energy sector will rank as the worst-performing in the S&P 500 when 2020 draws to a close on Thursday. read more

Oil Volatility Continues To Drive Demand In 3X US Oil Exchange Traded Products

Due to the uncertainty that COVID-19 was going to have on the global economy in general, and crude oil specifically, West Texas Intermediate (WTI) front-month futures contracts closed at a negative price in April 2020. WTI represents the price for future delivery of a barrel of WTI crude oil. Since June 2020, WTI front-month futures contracts have traded between $34-$43 per contract. read more