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.