Account

New to ADSS? Open an
account now to get started.

OR

Already have an account?

Add funds to your ADSS account

Account

New to ADSS? Open an
account now to get started.

Add funds to your ADSS account

Trends & Analysis
News
Thor shares decline despite upbeat earnings
News
Is Walmart recession-proof?
News
EUR/USD slides despite strong Germany data
News
Crude oil settles lower after surging past $82
News
Will rates ruin the S&P 500?
News
S&P 500 declines despite upbeat NFP data
Trends & Analysis
News
Thor shares decline despite upbeat earnings
News
Is Walmart recession-proof?
News
EUR/USD slides despite strong Germany data
News
Crude oil settles lower after surging past $82
News
Will rates ruin the S&P 500?
News
S&P 500 declines despite upbeat NFP data

Account
New to ADSS? Open an
account now to get started.
Open an account Login

Asset Watch

Should we expect a rebound in crude?

 

Thursday, July 14, 2022

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.

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?


Site by Pink Green
© ADSS 2022


Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.

ADS Securities LLC (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates as a trading broker for Over the Counter (“OTC”) Derivatives contracts and foreign exchange spot markets. ADSS is a limited liability company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.

The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.

ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.