Looking To Trade The Energy Sector After Russia, Saudi Arabia Extend Oil Production Cuts? This Fund Offers Leverage

The Direxion Daily S&P Oil & Gas Exp & Prod Bull 2X Shares GUSH popped up about 2.5% at one point Tuesday after Saudi Arabia and Russia announced a decision to extend crude oil production cuts until December.

The news caused stocks in the oil sector to extend their rallies, with the price of WTI-graded crude oil prices rising to $87 a barrel.

GUSH is a double-leveraged fund designed to outperform the movement of companies held in the S&P Oil & Gas Exploration & Production Select Industry Index.

A few of the most popular companies held in the ETF are Exxon Mobil Corp XOM, which is weighted at 0.84% within the ETF; Occidental Petroleum Corporation (NYSE OXY), weighted at 0.86%; and Marathon Oil Corporation MRO, weighted at 0.91%.

It should be noted that leveraged ETFs are meant to be used as a trading vehicle as opposed to long-term investments.

For traders looking to play the oil and gas sector bearishly, Direxion offers the Direxion Daily S&P Oil & Gas Exp & Prod Bear 2X Shares DRIP.

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The DRIP Chart: GUSH broke up from a bull flag on Friday, indicating a long-term reversal to the upside could be on the horizon. The measured move of the bull flag is about 35%, suggesting the ETF could climb toward the $50 mark if a new uptrend is confirmed over the next few trading days.

• The move higher on Friday caused GUSH to negate its downtrend with the formation of a higher high. For a new uptrend to confirm, the ETF will eventually need to retrace to form a higher low above $36.94, which was the lower low created on Aug. 23.
• On Aug. 28, the 50-day simple moving average (SMA) crossed above the 200-day SMA on the GUSH chart, which caused a golden cross to form. A golden cross indicates a stock of ETF could be heading into a long-term bull cycle.
• A retracement is likely to come over the next few days because GUSH’s relative strength index (RSI) popped back above the 70% mark on Tuesday. When a stock’s RSI reaches or exceeds that level, it becomes overbought, which can be a sell signal for short-term technical traders.
• If that happens, it could provide a solid entry point for short-term traders into this leveraged ETF.
• GUSH has resistance above at $44.73 and at $48.53 and support below at $41.39 and at $37.11.

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