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3 Leveraged ETFs For Sinking Energy Stocks

February 25, 2020 9:19 am
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3 Leveraged ETFs For Sinking Energy Stocks

Due in large part to the panicked selling caused by the spread of the novel coronavirus, also know as COVID-19, oil prices and energy equities are tumbling. For example, the United States Oil Fund (NYSE:USO) slid 3.76% on Monday on heavy volume, extending its year-to-date loss to 16.16%.

Don't look to energy equities for refuge. The sector is being pounded by the coronavirus and the shift to renewables. On volume that was more than double the daily average, the Energy Select Sector SPDR (NYSE:XLE) slumped 4.62% in Monday's sell-off, taking its 2020 loss to 14%.

Over the near-term, forecasting when the coronavirus issue will stop being an issue is becoming increasingly difficult, but that spells good news for the following bearish exchange-traded funds.

Direxion Daily Energy Bear 3X Shares (ERY)

The Direxion Daily Energy Bear 3X Shares (NYSE:ERY) looks to deliver triple the daily inverse returns of the Energy Select Sector Index, the same index the aforementioned XLE targets. With concerns mounting about the ability of Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), the index's two largest components, to grow dividends this year, ERY was bound to catch a bid.

However, the coronavirus has turned into a significant spark for this bearish energy fund as ERY has amassed a year-to-date gain of 52.09%.

Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares (DRIP)

This where the wild things are in the energy patch and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares (NYSE:DRIP) proves as much. All this fund has done is more than double since Jan. 1. DRIP seeks performances that triple the daily inverse of the S&P Oil & Gas Exploration & Production Select Industry Index.

Slack expectations for the global oil output are bolstering the near-term case for the bearish DRIP.

“There is no escaping the fact that China—the world’s largest oil importer—will have meaningfully weaker near-term oil demand than we had envisioned as the year began,” said Raymond James analyst Pavel Molchanov in a recent note.

Even in strong oil bull markets, a far-flung concept these days, the ISE-Revere Natural Gas Index has a way of lagging and that laggard status flares up when oil prices sink. Enter the Direxion Daily Natural Gas Related Bear 3X Shares (NYSE:GASX), which looks to deliver triple the daily inverse returns of that index.

When GASX works, it really works as highlighted by yesterday's gain of more than 18%, one that extended the bearish geared fund's 2020 jump to north of 120%. That's also a reminder to not be caught on the wrong side of this trade.

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