Oil Stocks Rise As Israel-Hamas Conflict Intensifies, Analysts See Supply Constraints: This ETF Offers 2X Leverage

Direxion Daily S&P Oil & Gas Exp & Prod Bull 2X Shares GUSH was rising about 1.6% higher on Tuesday amid increased geopolitical conflict, which caused Morgan Stanley analyst Daan Struyven to weigh in on how the Israel-Hamas escalation could tighten oil supply.

On Oct. 4, UBS analyst Josh Silverstein raised the price target on Marathon Oil Corporation Corp MRO from $35 to $37 and maintained a Buy rating on the stock. Exxon Mobil Corp XOM and Chevron Corporation CVX both had their price targets bumped higher earlier this month, further indicating analysts are bullish for the oil and gas sector.

GUSH is a double-leveraged fund designed to outperform companies held in the S&P Oil & Gas Exploration & Production Select Industry Index by 200%.

A few of the most popular companies held in the ETF are Exxon, which is weighted at 1.34% within the ETF; Occidental Petroleum Corporation OXY, weighted at 1.37%; and Marathon Oil, weighted at 2.36%.

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 ARCA: DRIP).

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The GUSH Chart: After briefly losing support at the 200-day simple moving average (SMA) on Oct. 4, bulls came in and drove GUSH back up above that level, which suggests the ETF is trading in a bull cycle. Although GUSH regained the 200-day SMA and has risen over 12% from the area, the ETF hasn’t yet retraced to form a higher low.

• If GUSH eventually retraces above the 200-day SMA and prints a bullish reversal candlestick, such as a doji or hammer candlestick, the ETF’s current downtrend will be negated. For a new uptrend to confirm, the ETF will also need to print a higher high.
• GUSH may not retrace all the way to the 200-day SMA, however, because the ETF has a gap below between $35.35 and $36.24. If GUSH falls to close that gap, the lower range of the gap is likely to act as support and a bounce may come from that area.
• GUSH has resistance above at $41.39 and at $44.73 and support below at $37.11 and at $35.15.