This “Stealth Rally” Has a Few More Weeks to Peak

The past week has seen a big shift in investor sentiment following the latest Fed meeting and inflation fears. While some sectors like tech have performed relatively better, one market has been in a strong uptrend for the past few months.

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  • And, from a seasonal perspective, it’s also an area that will likely have its strongest demand over the next few weeks, until downshifting in the fall.

    That sector is the energy space, particularly oil. Prices of crude are at two-year highs, thanks to supply constraints put in place during the pandemic and a strong return of demand. Some traders are even quietly betting on a move over $80 this summer, and options on oil are getting as high as the $100 range, where it hasn’t traded since 2014.

    Action to take: Investors can take advantage of last week’s drop in oil prices to buy into the space now, and obtain both capital gains and dividend yields in the months ahead. Investors may want to buy shares of a company like ExxonMobil (XOM), as the oil giant currently yields 5.6 percent.

    Traders can also bet on a move higher with a call option trade. Exxon’s October $65 calls stand an excellent chance of moving in-the-money. Last trading for about $2.15, they can provide high double-digit returns if the typical summer driving season allows oil prices to rally to $80.

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    Disclosure: The author of this article has no position in the stock mentioned here, but may trade this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.