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XLE Needs to do This to Legitimize a Rebound

This article was originally published on ETFTrends.com.

The Energy Select Sector SPDR (XLE) , the largest equity-based energy exchange traded fund, is sporting a fourth-quarter loss of about 14% so a rebound may not be imminent nor may it be the first thing on investors' minds when it comes to the energy sector.

However, if the benchmark energy ETF can hold some key technical levels, a rebound becomes a more likely proposition. During oil’s recent slide, XLE and other basic energy ETFs performed significantly less poorly than the underlying commodity. Additionally, there are signs of life on XLE’s charts.

“The XLE energy ETF has fallen more than 1 percent since Monday, on track for a second week in the red. The group has plummeted into a bear market, having fallen more than 20 percent from its 52-week highs set in May,” according to CNBC.

Checkout The Charts

Down just over 12% year-to-date, XLE entered Thursday also residing about 12% below its 200-day moving average. Last month, the ETF fell victim to the dreaded death cross, the technical scenario where a security's 50-day moving average falls below its 200-day line.

“You have a double bottom right here at a crucial technical level — $61.50 – double bottoming against that mid-2017 low. Given that, I have to give it a shot down here,” Bill Baruch, president of Blue Line Futures, in an interview with CNBC. "But if that level gets taken out, look out below."

Some market observers see value in the beaten up energy patch.

“After its three-month slump, the sector now offers some hidden value gems, says Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management,” according to CNBC.

XLE and other traditional cap-weighted energy ETFs are typically heavily allocated to Exxon Mobil (XOM) and Chevron (CVX). Those stocks combine for over 37% of XLE’s roster.

Rivals to XLE include the Vanguard Energy ETF (VDE), iShares U.S. Energy ETF (IYE) and the Fidelity MSCI Energy Index ETF (FENY).

For more information on the oil market, visit our energy category.

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