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Trends & Analysis
News
Norwegian Cruise has a rocky journey in Q2
News
Could eBay bounce this week?
News
BioNTech’s shares shorted after disappointing Q2
News
Western Digital’s stock down despite upbeat print
News
Alibaba delivers upbeat print, shares rise
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Is gold in trouble?

CFDs & spread bets are complex instruments & come with a high risk of losing money rapidly due to leverage. 73% of Retail investor accounts lose money when trading CFDs & spread bets with this provider. You should consider whether you understand how CFDs work & whether you can afford to take the high risk of losing your money.


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Asset Watch

Should we expect a rebound in crude?

 

Thursday, July 14, 2022, 11:50am GMT

With crude oil futures plunging by roughly 8% on Jul. 12, fears of an economic slowdown have amplified volatility across the commodities complex. Plus, with the U.S. 10-2 Treasury yield spread inverting recently – which often predicts recessions – anxiety has run rampant on Wall Street.

 

While crude’s volatility may be too much to stomach, there is an opportunity that offers a higher risk-reward proposition. For example, the Energy Select Sector SPDR (XLE) ETF is the largest energy ETF in the world. And while the ETF often moves in unison with crude oil futures (the black line), the fund (the candlesticks) closed above its 200-day moving average on Jul. 12.

Source: TradingView

The last four times the XLE ETF reached or fell slightly below its 200-day MA, short and long-term rallies followed. Therefore, the downside is minimal if the XLE ETF can hold the line. If crude recoups some of its losses, the XLE ETF should follow suit.

 

In contrast, a material drop below the 200-day MA ($68.19) could provide us with a profitable shorting opportunity. If the XLE ETF breaks down, support becomes resistance, and the shorting window is open until the XLE ETF proves otherwise. This means the right trade depends on whether the XLE ETF stays above this key level.

 

So, with the XLE ETF now in fight or flight mode, should we trade around the 200-day MA?

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CFDs and Spreadbets are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of Retail investor accounts lose money when trading CFDs and Spread Bets with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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