As the rally in crude oil begins to stall near new highs, many of the stocks based on everything from oil drilling and exploration to equipment and services have not only pulled back. Many have already returned to levels at which buyers, historically speaking, have been tempted off the sidelines and into the market with some force.
The S&P Oil & Gas Exploration & Production SPDRS ETF (NYSE: XOP), for instance, has closed lower for two days in a row, and five out of the last six. In fact, out of the last five trading days, XOP has finished four of them in technically oversold territory.
Down over one and a quarter percent on Monday and trading at new, two-week lows, XOP earned a one-point ratings upgrade early in the session, and is set to open on Tuesday with “consider buying” ratings of 9 out of 10. The fund also has a positive edge of nearly one and a quarter percent the short-term.
Representing the equipment and services end of the oil and gas business, the iShares Dow Jones US Oil Equipment & Services Index Fund ETF (NYSE: IEZ) also has closed lower for five out of the last six sessions, including two in a row as of Monday’s close. Arguably, IEZ is even more short-term oversold than XOP, having closed in oversold territory five times in the past week and a half compared to XOP’s four.
Like the S&P Oil & Gas Exploration & Production SPDRS ETF, the iShares Dow Jones US Oil Equipment & Services Index Fund ETF has a “consider buying” rating of 9 out of 10 after earning a one-point ratings upgrade early in trading on Monday.
For traders looking for a leveraged way to trade the pullback in oil stocks, there may be no bigger bang for your buck than the Direxion Daily Energy Bull 3x Shares (NYSE: ERX). ERX is leveraged three-to-one to the daily return of the Russell 1000 Energy Index, and sold off by one and a quarter percent in Monday’s session, trading down to its lowest closing level in two weeks.
Like XOP and IEZ above, the triple-leveraged ERX has earned “consider buying” ratings of 9 out of 10. The ETF also has a sizable, short-term, positive edge of more than three percent.
Precise rules. Higher Edges. Full Disclosed Test Results. Click here to learn more about The Long Pullbacks Strategy by Larry Connors and Cesar Alvarez.