Major equity indexes oscillated between minor gains and losses on Wednesday as earnings jitters collided with economic data. On the stock market front, tech-bellwether Apple (AAPL) posted lackluster results that left shares largely unchanged while durable goods orders data posted a worrisome contraction of 5.7% compared to last month’s figure of negative 3.2% [Download 101 ETF Lessons Every Financial Advisor Should Learn].
Energy giant Exxon Mobil (XOM) is slated to report earnings later today, which brings our spotlight onto the Dow Jones U.S. Energy Sector Fund (IYE, A), as it allocates over 23% of its total assets to the company. Analysts are expecting for the firm to report earnings of $2.04 per share, compared to a year ago when XOM reported earnings of $2 per share [try Free ETF Stock Exposure Tool].
Consider IYE’s one-year daily performance chart below. Notice how this ETF appears to have completed a healthy correction since peaking at $45.66 a share in mid-March of 2013, judging by its ability to rebound off its 200-day moving average (yellow line), which has allowed it to remain above its longer-term upward sloping support level (blue line). What’s also noteworthy is that this ETF has previously rebounded off the blue support line, as seen in mid-November and at the end of December last year [see 13 ETFs Every Options Trader Must Know].
As such, entering into a long position at current levels is attractive because traders can favorably position themselves in anticipation of a run higher while still keeping a close watch on downside risk by setting a tight stop-loss near the 200-day moving average [see How To Swing Trade ETFs].
If XOM surpasses analysts’ expectations tomorrow, IYE could see a fundamental boost that drives it closer towards its recent highs; in terms of upside, IYE has major resistance right around $45 a share. On the other hand, disappointing results from the energy giant can inspire profit taking across the entire sector; in terms of upside, this ETF has major support at $42 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.