BHT identifies meaningful trends and important supply and demand levels in the financial markets. An understanding of these dynamics will add Alpha to any investment strategy. The following are important factors to consider in the Energy and Energy ETF markets.
Oil - Oil gapped up Friday afternoon after breaking resistance around the $45.50 level. This level will probably be support in the short-term now. Longer-term, there will probably be resistance around the $51 level because that’s where the recent highs were at the end of May. The $51 level has been important over the past few years. It was important resistance in October of 2015, June of 2016, and October of 2016. Then it became support in January and February of 2017. There should continue to be longer-term support around the $43 level. It was support last September and November, and again last month.
Natural Gas - Natural Gas continues to trade around the $3 level as it consolidates just above it. This level was support in the middle of April as well. The recent highs have been around $3.10 and the recent lows have been around $2.90. If it breaks there will probably be a meaningful sell-off. Longer-term, the $2.50 level has been important support. It was the low last August, November, and again in February. If it trades down to these levels again there will probably be significant support there.
XLE – S&P 500 Energy Sector ETF Long term - The XLEs continue to test support around the $64.50 level. As expected, there was support at this level because the last four times they traded down to around $64.50, during last May, June, and August of 2016, and then again in early June, a rally followed.
XOP – S&P 500 Oil & Gas Exploration & Production ETF - The XOPs sold off down to $30 after breaking support around the $32.50 level. There was support there because it was support during last May, June, and August. It will now probably be a resistance level. They are in an uptrend after rallying off of the $30 level.
OIH – VanEck Vectors Oil Services ETF - The OIHs are consolidating around the $24.50 level. Over the past two weeks the highs have been right around $25 and the lows have been right around $24. There is support around $24.50 because it was top of the range in early 2016.
AMLP - Alerian MLP ETF - The AMLPs sold off sharply after breaking important support around the $12 level. This level was support last June, September, November and December. After breaking their downtrend and rallying off of the $11 level, they are now back up to $12. There will probably be resistance here. If it breaks to the upside a meaningful rally could take place.
IXC – iShares Global Energy ETF - The IXCs gapped down after breaking support around the $32 level. These levels were support in November, March, April and May. They are now consolidating around the $31 level. This is where the lows were last August and September.
KOL – VanEck Vectors Coal ETF - The KOLs have been consolidating around the $13 level with short-term support around $12.50. They trended lower after failing at the resistance around the $14 level. There is resistance around the $14 level because this is where they were trading in early 2015 before the large selloff began. It was also resistance in November.
FAN – First Trust Global Wind Energy ETF - The FANs are trending lower after failing at the $13.50 level again. This level was also resistance last August and September, and in June of 2014. Each time was followed by a significant selloff. Friday’s close was $12.91. There isn’t clearly defined support until they approach the $12 level.
TAN – Guggenheim Solar ETF - The TANs trended higher after finding support around the $17 level in April. This level was also support in November and February. As expected they ran into resistance around the $19 level, but they gapped up after breaking through it and are now consolidating around $20 after becoming overbought. $19 should be a support level if they head lower.