What to Buy: ERY
Today’s market, The Oxen Group thinks, may be a very important day. We have a lot of very important earnings released today, and if they are good, it challenges can the market continue to sustain a rally. Or, will it jump up and sell out throughout the day? If earnings are not good, the market will definitely be red.
One sector, however, that may be more predictable tomorrow is crude oil. In after hours, the American Petroleum Inc. said that oil inventories rose 3.1 million barrels last week, while analysts had expected that barrels were supposed to drop 2.0 million barrels. Even with a green Asia, oil prices dropped, which makes us think that even if the market gains tomorrow, oil prices will still be driven down by inventory information, raising the price of Direxion’s Daily Bear Oil and Energy ETF (ERY). If the market jumps out early on positive earnings, then wait to buy into ERY. We suspect that the market cannot hold another rally, and oil will be less impacted by this and more impacted by inventories, which if API’s information is any prediction of what the Energy Dept. will report, should send shockwaves into the oil market, helping out this inverse ETF.
This ETF has been so oversold and undervalued that any sign of lowered demand could severely weaken oil futures, thus ERY would be ready for a large swing upwards. Further, the only major oil news to come out is the inventories, and it should move the market. If futures are good going into the day wait before buying for the market to top out.
Entry: Recommend buying in 5-20 minutes into session or 30-50 depending on futures.
Exit: We recommend exiting after a 2-4% increase.
Stop Loss: We recommend a 3% stop loss on all buy in prices
Upper Resistance: 23.50
