Moby Waller Blog | Energy ETFs Have Further Upside In 2017 | Talkmarkets
Chief ETF Strategist, Wyatt Research
Contributor's Links: Wyatt Research

Moby Waller is a former CBOE Market Maker floor trader and off the floor London-based European Index Options Trader, with 20 years of experience in the investment field.

He currently manages the ETF Sector Alerts newsletter for Wyatt Research.  This provides ETF Portfolio and ETF ... more

Energy ETFs Have Further Upside In 2017

Date: Monday, January 9, 2017 3:21 PM EDT

Crude oil dropped from over $107 a barrel in 2014 to under $30 a barrel in January 2016.  That's a bigger plunge than it had even during the 2008 economic crisis!

This selloff was clearly overdone to the downside, and negatively affected stocks in the entire Energy sector. 

But now oil is in the early stages of rebounding, and the benefits from its bounce-back are exponentially felt in energy stocks, particularly in oil services and equipment. 

Many companies in this group have found a way to be profitable at low oil prices, and they now enjoy a leveraged increase in profits for each move higher in the underlying commodity.

There are several factors in place that should benefit the energy sector going forward in 2017:

1.  The global economy is growing faster than expected, which leads to increased demand for oil.

2.  OPEC, led by Saudi Arabia, enacted production cuts in November 2016.  This was its first agreement to cut oil production in 8 years, and included large producers such as Iran, Iraq and Russia.

3.  The incoming Trump administration is likely to cut regulations on the US energy sector, which should increase revenues and profits.  Additionally, the overall political environment will likely be much more business-friendly, which can lead to increased merger & acquisition (M&A) activity among energy companies.

I use Exchange Traded Funds (ETFs) to benefit from the sectors that are outperforming the broad stock market.

An ETF is a basket of companies -- a basket of stocks lessens the overall risk from any individual name, and also decreases volatility overall compared to an individual stock.

You can pinpoint an ETF that is charting its own course and making gains, regardless of what the S&P 500 or the other major market indexes are doing.  I do this with a tested trend momentum method, using unique charts and indicators.

I've been bullish on the Energy sector  since a clear bottom was reached in early-2016.  There is an ongoing big picture rebound in place among Energy stocks, after the sector had a massive selloff from mid-2014 to early-2016 -- with plenty more potential upside ahead.

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