January 2020 Energy Sector Analysis

We have been discussing the opportunity that may be presenting itself in the Energy sector. With oil prices rising, and valuations better than other areas of the market, there are some trading opportunities starting to appear.

While the portfolios are designed to have longer-term holding periods, we understand that things do not always go the way we plan. We are entering the energy sector on a trading basis only, which could be very short-term, until both the positions and the overall thesis begins to mature.

While there are a LOT of energy companies to choose from, we have eliminated all companies which are NOT PROFITABLE from our analysis. All candidates must also pay a dividend to comply with our total return thesis and portfolio strategy.

Sector ETF’s

XLE – Energy Select Sector SPDR

  • With the broad energy sector on a buy signal, we are looking to add exposure to our portfolios.
  • We have been reluctant to move too quickly as previous rally attempts to the 200-dma have been selling opportunities.
  • With the sector very overbought short-term, we are looking for a pullback in the broader energy sector to add 1/2 position to the Equity and ETF portfolios.
  • Stop is will be set at $58 after entry.

IEO – iShares U.S. Oil & Gas Exploration

  • As with the broader energy space, Oil & Gas exploration has also broken about the 200-dma and is on a buy signal.
  • As with XLE, IEO is very overbought and needs a correction to work off the overbought position before positions can be added.
  • The stop is set at $53 after entry.

IEZ – iShares U.S. Oil Equipment & Services

  • Oil & Equipment Services doesn’t look as convincing as the refining and major oil companies look.
  • While IEZ is very overbought it is just now making an attempt to break above the 200-dma. It is too early to consider this space as most of the companies in the sector are not profitable and are carrying a lot of debt.
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Disclaimer: Real Investment Advice is powered by RIA Advisors, an investment advisory firm located in Houston, Texas with more than $800 million under management. As a team of certified and ...

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