Looking for some solid gains with minimal risk? Here’s how – April 18, 2022
XLE XOP WTI CRK PARR PBF CVI CTRA RRC EOT DK AR SWN VLO OXY INT CNX PSX ALTO CRGY GEVO GPRE TELL LFG CLNE CDEV REGI KOS CIVI CLR SM REX XOM GPOR OIH
One of the things that come up quite a bit is how to buy these various energy stocks. There have been so many stocks that have just gone parabolic and then others, of course, haven’t. The typical trading style that anybody should want to follow is you want to be in the strongest stocks. Strong meaning, they’re making you the most money. You really want to be in those stocks, the top one or two stocks in a sector, maybe the third one, but definitely limit your exposure to the top three stocks in a sector or an industry group.
One thing that you can do, let’s say you are kind of looking for a general way to trade in the market, to trade in the energy market here, without taking on too much risk from buying the top stock, even though it’s up 30 percent in the last 3-weeks or whatever. One way to do that is to go the general way and buy, in this case, the XLE ( NYSEARCA: XLE ).
Now, you are absolutely not going to underperform or outperform the energy sector because this is the sector, this ETF. So at least if the energy market is moving higher you are going to make money on the trade. And this, for a lot of traders, is preferable to buying some stock that is absolutely screaming.
BUT on the other hand, you could say, well I will just buy the stocks that are down the most because then I am not going to get hurt. No, you don’t want to be doing that because what you are doing is, basically, the worst house in a good neighborhood, and that is fine until the neighborhood goes to crap. What you want to be doing is you want to move your portfolio in the right direction.
And so by buying, literally, the average in the XLE ( NYSEARCA: XLE ), you are bringing in the underperformers, no question about it. But you are also participating in the outperformers. You don’t have the singular stock exposure, you have, really, the profit exposure to the entire energy sector.
Now, another way you can do it, if you want to get a little more specific is, the Exploration & Production ( NYSEARCA: XOP ) ETF. You look at this, I kind of don’t think that 146.63 is the high, but there is no question this has really screamed.
Let’s look at the individual stocks, we’ve got 60 here, we will order them in terms of gains. Let’s get to the daily chart, WTI ( NYSE: WTI ); no thanks, a nice move today but this isn’t really something that I would look at. Comstock Resources ( NYSE: CRK ), do you want to buy this stock? No, but I sure as heck would like to own it. I don’t know this, PBF ( NYSE: PBF ) but we are seeing a lot of these stocks that you’re really not familiar with ( NYSE: CVI ) but they are moving higher, they’re in the XOP ( NYSEARCA: XOP ), ( NYSE: CTRA ). All of these winning stocks ( NYSE: RRC ), ( NYSE: EQT ), are in the XOP ( NYSEARCA: XOP ).
Now, can you buy EQT Corporation ( NYSE: EQT )? I couldn’t buy it here but I could buy the XOP ( NYSEARCA: XOP ), ( NYSE: DK ). We keep on going, ( NYSE: AR ), ( NYSE: SWN ), ( NYSE: MUR ), ( NYSE: VLO ), ( NYSE: OXY ), do you see what I am talking about? OXY ( NYSE: OXY ) probably looks the most like the XOP ( NYSEARCA: XOP ) chart. We can go down here, ( NYSE: INT ), ( NYSE: PSX ) but I am not going to.
The bottom line is when you are buying the XOP ( NYSEARCA: XOP ) you are buying all of these winners. However, ( NASDAQ: ALTO ), ( NYSE: CRGY ), ( NASDAQ: GEVO ), ( NASDAQ: AMTX ), ( NASDAQ: GPRE ), ( NYSEAMERICAN: TELL ), ( NYSE: LFG ), ( NASDAQ: CLNE ) you are buying these stocks that are drifting lower as well, but this is on the daily chart. How many of these stocks that I am looking at ( NASDAQ: CDEV ), ( NASDAQ: REGI ), ( NYSE: KOS ), ( NYSE: CIVI ), are actually weak? Really, I don’t see any ( NYSE: CLR ), ( NYSE: SM ), so far. I’m sure there is one in there, I wouldn’t buy this ( NYSE: REX ).
The point is, what you are buying with the XLE ( NYSEARCA: XLE ) or the XOP ( NYSEARCA: XOP ) in this case, what you are buying ( NYSE: GPOR ) is the diversification of a really, really strong sector. And so this is one way that you can consider going. The same thing with the OIH ( NYSEARCA: OIH ).
All of these ETFs are safer investments, where you are in the right area but you don’t have to be picking a stock that has been absolutely screaming because you want to be in the best stock in the best sector. That’s a really big risk that you are going to get hurt by some kind of a pullback. So you have got a theme investment going here without having an individual stock risk.
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