ETF Bull and Bear Discussion Board

[JohnCM]

6 Ways To Profit As Oil Prices Surge, And A High-Octane Stock Play

IBD
NANCY GONDO
05/17/2018

Energy Select Sector SPDR (XLE)
Vanguard Energy (VDE)
iShares Global Energy (IXC)
iShares U.S. Energy Index (IYE)
SPDR S&P Oil & Gas Exploration & Production (XOP)
Fidelity MSCI Energy Index (FENY)
Direxion Daily Energy Bull 3X Shares (ERX)

Oil exploration stock plays are surging along with crude futures amid expectations the global oil glut will continue to ease.

West Texas intermediate crude topped $72 a barrel, while Brent got above $80, its highest level since November 2014. Earlier this month, light sweet crude (WTI) hit $70 for the first time since November.

Prices rose further after the Trump administration announced May 8 the U.S. would withdraw from the Iran nuclear deal but delayed imposing sanctions. Renewed sanctions on Iran along with OPEC production cuts are expected to tighten global supplies, leading to higher oil prices.

As a result, oil explorers' stock prices are surging.

Energy Select Sector SPDR (XLE) gained about 1.5%. It's extended from a prior handle buy point, but just climbed past a 78.49 entry from the left-side high. The $19.3 billion fund's top three holdings as of May 16 were Dow Jones industrial average components Exxon Mobil (XOM), Chevron (CVX) and Schlumberger (SLB). It tracks the S&P Energy Select Sector Index, which is 86% invested in oil, gas and consumable fuels. Energy equipment and services make up the remaining 14%.

Vanguard Energy (VDE), with $4.6 billion in assets, is extended from a 102.69 buy point of a cup with handle. It just rose past a 107.30 entry of the left-side high. The ETF tracks the MSCI US Investable Market Energy 25/50 Index and also holds Exxon, Chevron and Schlumberger as its top three names.

Surging Stocks

SPDR S&P Oil & Gas Exploration & Production (XOP) rallied 2.9% and is now extended from a 40.29 buy point. The $3.1 billion fund's top holdings as of May 16 included California Resources (CRC), Whiting Petroleum (WLL), HollyFrontier (HFC) and Carrizo Oil & Gas (CRZO). Whiting leads those stocks with a 96% gain this year, followed by California Resources' 93% advance. HollyFrontier is up 41% and Carrizo has risen 29%.

Other energy funds scoring big gains include:

iShares Global Energy (IXC) ($1.8 billion) tracks the S&P Global 1200 Energy Sector Index.
iShares U.S. Energy Index (IYE) ($1.1 billion) tracks the Dow Jones U.S. Oil & Gas Index.
Fidelity MSCI Energy Index (FENY) ($640.1 million) tracks the MSCI USA IMI Energy Index.

And a high-octane play:

Direxion Daily Energy Bull 3X Shares (ERX) ($504.8 million) aims for 300% of the daily performance of the S&P Energy Select Sector Index.
NOTE: Leveraged plays such as ERX target double or triple the performance or inverse performance of the underlying index. Be aware that these tend to be more volatile than their nonleveraged counterparts and usually have higher expense ratios.