Three Uptrends in a Falling Market

 

Date: 8/30/2022
Author: Chris Hood

 

 


Energy prices, especially in Europe, have skyrocketed over the past few months due to the war between Russia and Ukraine.

Though the US and Canada haven’t been hit the same way, the global economy is interconnected.

And there doesn’t seem to be an easy way out of this predicament.

You know that I don’t like to trade on theories and fundamentals.

However, the charts back up analyst predictions that energy costs will continue to rise.

It’s irrelevant whether or not we believe these predictions. If investors with enough capital to move tickers do, then we can watch the charts and make money.

My trade room subscribers have profited on the wild market chop.

Moving to shorter time frames lets us move in and out quickly on these rallies and pullbacks.

We’ve been a bit careful about long-dated options positions because the medium to long-term direction is difficult to predict in this mess.

And price action, even on solid companies, tends to follow the broader market.

So any significant dip in SPY could quickly kill an otherwise profitable bullish position.

I want to present three stocks (or ETFs) that you may want to consider for longer-duration holds.

The point isn’t for you to run out and make unplanned trades on them. If you’re working with options, you could still get crushed if you enter a position at the wrong time.

But all of these seem set to continue rising unless something drastic changes.


 


First, let’s take a look at ERX.

 

 

ERX is a triple-leveraged bullish ETF that tracks the energy sector XLE. In other words, it’s designed to move at three times the rate of XLE.

This can lead to massive gains, especially when you’re trading options.

ERX saw a huge run from the first of the year to a high of nearly 80.00 in early July – almost a 250% increase.

We certainly made a bit of money on that one along the way.

After a natural profit-taking pullback and consolidation, it’s headed up again with little resistance between its current price of 63.90 and 80.00.

Now let’s consider GUSH.

 

 

This triple-leveraged ETF that tracks XOP, the Oil and Gas Exploration and Production index, shows a similar story.

It rose 257% from Jan 3rd to Jun 8th of this year.

Same situation… a big drop as investors took profits, but the long-term trend remains intact. So this is definitely an ETF to consider.

Finally, let’s take a look at the utilities sector, XLU.

 

 

I personally don’t trade this sector very often, but that doesn’t mean you couldn’t.

The chart is a bit choppier than the others we discussed, but it does show a pronounced uptrend, even if it isn’t as smooth as the others.

Other than predictions of rising utility costs, one factor that makes XLU attractive is that it tends to do well even during high inflation.

People may elect not to spend money on discretionary purchases. Still, they aren’t going to turn off their electricity or water.

Utility companies just pass on the cost of doing business to the consumer, and (albeit begrudgingly), the bills get paid.

As always, these are ideas, not trades. Something for your watchlist.

Use your trading plan and rule set before you place your trades.

Cheers,
Chris Hood


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