This article is written exclusively for Investing.com
As measured by the Select Sector SPDR Energy ETF (NYSE :), the energy sector is down more than 50% in 2020. This is in stark contrast to
The industry's sharp decline was led by the declining price, which has fallen by nearly 40% as global demand for the product has shrunk in the wake of the coronavirus pandemic . Someone, however, is betting that the worse days of the energy sector are over, and is betting that the XLE will rise sharply in mid-January.
It's not just the XLE that is starting to see some bullish momentum. Exxon Mobil Corp. (NYSE :), along with Chevron Corp. (NYSE :), has the leading weight in the ETF. Now, along with the XLE, Exxon is also starting to see some bullish gambling, which also suggests the sector is poised to turn for the better.
A Rebounding Sector
On September 25, interest outstanding for the January 15 calls rose $ 34 to 51,000 contracts. The data shows that 49,600 of the contracts traded charge about $ 1.20 per contract. It is a bullish bet, indicating that the value of the XLE will be above USD 35.20 in mid-January. It's also a pretty big bet, which is what makes it so interesting, with premiums paid at nearly $ 6 million.
In addition, the XLE is beginning to show some signs of a possible soil formation, based on the technical graph. The ETF may now be entering oversold territory. The relative strength index has fallen below 30; when an RSI reaches these levels, it indicates oversold conditions.
However, the chart suggests there may be more downside before a turn higher, with the next support level around a price of $ 27.50. However, should the XLE move above the resistance at USD 30.70, it could rise to around USD 34.50.
Betting on Exxon revolves around
Exxon is also starting to see some bullish momentum. Interest outstanding for the $ 45 calls on Dec. 18 increased about 11,000 contracts. The data shows that these calls were traded on demand and bought for about $ 0.25 per contract. It's a bullish bet that indicates Exxon's stock will be above $ 45.25 by the time it arrives in mid-December.
Exxon now appears to be filling a tech gap created after the March lows at a price of $ 32.50. In addition, the RSI on Exxon has now dropped below 30 twice. It is starting to show signs of a reversal in the trend, indicating a possible bottom in the stock. If the ETF were to reverse higher, the next meaningful level of technical resistance would be around $ 36.50.
Oil prices have recently fallen under pressure as concerns about global demand and rising stocks continue to make investors nervous. However, should global demand pick up and the coronavirus diminish, that could bring back optimism for economic growth. In fact, it may be the reason a trader is willing to take a substantial bullish bet on the defeated energy sector.
