The S&P 500 Energy Index is up 26% over the year, underscoring the strength of the sector. Some analysts suggest that the sector still has room for maneuver, what bullish traders and theDirexion Daily Energy Bull 3X-Share (ERX).
The trend reversal in the energy sector is certainly a 180-degree turnaround from 2020. The ERX has already risen by 56% in 2021.
“After years of underperformance, the US energy sector is showing bright flashes of lightning that suggest it has some legs to go,” said an article on OilPrice.com. “The sector just managed to outperform all 10 other sectors of the US economy in the first quarter of this year and recover from 2020 all-time lows.”
ERX aims to achieve daily investment results that correspond to 200% of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and comprises domestic companies in the energy sector, which includes the following industries: oil, gas and consumable fuels, and energy equipment and services.
ERX data from YCharts
Can the sector maintain its strong momentum?
Thanks to a bullish oil report from the International Energy Agency (IEA) for 2021, early signs suggest that the energy sector should be able to maintain its strong momentum. That bodes well for ERX dealers.
“It’s hard to imagine the energy sector making another strong run unless oil and gas prices can continue their impressive surge,” the OilPrice.com article continued. “These equity gains largely coincided with the rise in oil prices from historic lows after prices plummeted into negative territory in April 2020. The good news for the cops is that the oil prospect remains great. “
In addition, global demand should hold up for the rest of the year.
“The IEA revised global oil demand in 2021 by 230,000 barrels per day to 96.7 mb / d, which corresponds to an increase of 5.7 mb / d compared to 2020 levels,” the article says. “The energy watchdog based the upgrade on encouraging economic indicators. However, the recovery remains fragile due to the rising Covid-19 cases in key consumer regions. “
“The IEA says most of the demand growth will come in the second half of the current year, with strong demand growth requiring an additional 2MB / d of extra crude oil to well serve the markets,” the article added. “However, do not rush to buy barrels of crude in the hope that if prices rise, it will reverse because the IEA says there will be no supply crisis.”
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