The Hot List: 3 Energy Funds for Short Term Traders

Just last week, the market had put technology ETFs on sale. Closing in or near levels where buyers had historically been lured off the sidelines were such widely-traded tech funds as the Technology Select Sector SPDRS ETF (XLK) and the iShares Dow Jones U.S. Technology Sector Index Fund ETF (IYW).

In the days since, buyers have arrived to send shares of both exchange-traded funds higher. And now traders with a number of similarly widely-traded energy funds on their watch lists are looking to see if pullbacks in these funds will be as attractive to traders as pulbacks among their technology counterparts were a week ago.

Closing lower for a second day in a row and just outside of oversold territory is the Energy Select Sector SPDRS ETF (XLE). XLE has been largely range-bound for the month of November, with a modest bias toward the overbought (five overbought closes and only one oversold close over the past two weeks).

That said, XLE does have a small positive edge, due likely to the past two days’ worth of selling. But additional weakness will be required in order to bring the fund into truly oversold status.

Much the same is true of the iShares Dow Jones U.S. Oil and Gas Fund ETF (IYE). With a slightly smaller positive edge compared to XLE, shares of IYE finished flat on Tuesday, but did close in oversold territory.

Traders looking for leveraged options in the energy equity ETF market may want to keep an eye on the Direxion Energy Bull 3x Shares ETF (ERX). The positive edge in ERX is at least as large as the one in XLE, and ERX will open on Wednesday having closed lower for two days in a row.

It is worth noting that one major difference between last week’s technology funds and this week’s energy ETFs is that the former were trading in bull market territory while the latter are trading in bear market territory. But having closed lower for two days in a row, ETFs like XLE could find themselves trading at oversold levels before the end of the week if sellers remain on the offensive. And the more sellers pile into these ETFs, especially after they become oversold, the more likely buyers are to find reasons to re-enter the market.

All of the ETFs in today’s report were available from research and data available through The Machine. To learn more, click here.

David Penn is Editor in Chief of