be_ixf;ym_201910 d_17; ct_50

Select Page

How to Profit From Oil Supply and Demand: ETF Charts

How to Profit From Oil Supply and Demand: ETF Charts

Supply is down, demand is up…

That’s good news for oil companies. The headlines lean bullish for oil lately.

The supply of oil in storage fell 761,000 barrels last week, according to the American Petroleum Institute. Turkey threatened to shut down oil production in Kurdistan. OPEC continues to talk about new cuts to production … and demand for oil is rising across the world.

The fact is, fundamentals appear to be moving back toward balance in the oil industry. That’s in spite of the fact that the oil price remains locked below $55 per barrel. This early uptrend can be missed by investors focused on the underlying commodity.

However, there is money to be made in the energy sector right now.

The Giants of the Oil Industry

The shift drove the energy sector to break out last week, as you can see from the chart below:

There's good news for oil companies. The headlines lean bullish for oil lately. And there's money to be made in the energy sector right now.

The XLE Energy Select Sector SPDR ETF (NYSE: XLE) owns the giants of the oil industry. It holds about 22% of its capital in Exxon Mobil, 17% in Chevron, 8% in Schlumberger and 5% in ConocoPhillips.

Over 50% of its holdings are those four companies. The managers spread the other half of the capital over a basket of other companies.

As the chart above shows, that was a bad bet for most of 2017. On August 18, XLE closed at $62 per share, the lowest price since April 2016.

That was the bottom. Since then, the trend soared upward.

The great trading service, SentimenTrader.com, published this earlier this week:

A month ago, more than half of energy stocks had plummeted to a 52-week low. Since then, the sector has enjoyed a historic cluster of positive days, and the S&P 500 Energy Sector has closed above its 200-day average for the first time in more than six months.

The writer at SentimenTrader also pointed out that this kind of trend usually results in double-digit gains over the next few weeks.

That means we speculate in energy stocks. XLE is a good way to do that. Here are some other exchange-traded funds that would work as well:

There's good news for oil companies. The headlines lean bullish for oil lately. And there's money to be made in the energy sector right now.

All these funds show similar recovery since mid-August.

Don’t look to buy and hold this sector for long. Take the gains as they come, but be ready to jump out if the trend turns against us.

Good investing,

Matt Badiali
Editor, Real Wealth Strategist

About The Author

Matt Badiali

Matt Badiali has a hands-on, go-anywhere, talk-to-everyone approach to his investment prospects and research. His work has taken him to Papua New Guinea, Iraq, Hong Kong, Singapore, Haiti, Turkey, Switzerland and many other locations around the world. He’s visited countless mines and oil wells the world over, interrogated CEOs about their latest resource prospects and analyzed all manner of geologic data.

MEET OUR EXPERTS

WHAT READERS ARE SAYING..

I am up $20,070 in closed positions from Feb. 18 through March 7.

- Bob Rowe

I started your system in December … I am ahead $29,000 … I put total faith in you and your system and it has worked for me very nicely. Thanks again I sure like your humble approach about this whole thing

- Dale Leiffer

I have made a little over $4,000 while being cautious.

- Chuck Goss

Share This