The Top 3 Ways to Trade an Oil Rebound

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FILE PHOTO: A view of the Johan Sverdrup oilfield in the North Sea

With oil prices set to gush higher, it may be time to pick up oversold stocks.

“Oil prices could soon hit $150 a barrel and go higher this year, with demand destruction likely by the end of the year, the CEO of global commodities trader Trafigura said,” as noted by Reuters. “More recently, the easing of COVID-19 restrictions in China is expected to boost demand and lift oil prices from current levels around $120.”

That being said, investors may want to consider these trade ideas.

SPDR Energy Select Sector ETF (XLE)

The XLE ETF provides exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries, as noted by State Street SPDR. Not only does an ETF allow for diversification, you can buy it for less.  The XLE is also oversold at $76.13, and is starting to pivot higher from over-extensions of RSI, MACD, and Williams’ %R.  From a current price of $76.13, we’d like to see the XLE ETF refill its bearish gap around $87 initially.

Exxon Mobil (XOM)

After dropping from $105 to about $85, XOM is also wildly oversold on RSI, MACD, and Williams’ %R.  Also, “Unlike many of its competitors, Exxon Mobil (XOM) bet that the world will continue to run on fossil fuels over the medium term and that’s a bet that will pay off, writes Credit Suisse analyst Manav Gupta. Unlike its Big Oil peers, many of whom forecast that the energy transition would lower demand for oil and gas, Exxon has continued to invest in the production of both commodities,” as noted by Barron’s.

Chevron Corp. (CVX)

CVX is just as oversold.  After plummeting from about $180 to $140, the oil stock caught strong support, and is also reversing from oversold RSI, MACD, and Williams’ %R.  From a current price of $151.23, we’d like to see CVX run back to $180 again, near-term.  Also, in early June 2022, Credit Suisse raised its price target on CVX to $202 from $190.  Analysts at Cowen also raised their price target on CVX to $179 from $165.