Betting Against Oil in April is Madness

The last time XLE traded higher by 10% or more during the month of March was in 1999 and 2000. In April of 1999, XLE soared by another 14.5%. In 2000, it traded lower by a mere 1.5%.

As of today, XLE is up 10% for the month of March. The core components of XLE are XOM, CVX, SLB, OXY and PXD–making up 40% of the ETF.

As you can see by the seasonality date from Exodus, XLE tends to do very well in April.

More importantly, analyzing 45 years of trading data in XOM, April is, by far, the strongest month for the stock.

I am short XLE and do believe there is an appreciable downside to the sector, at some point in 2016. However, most of the debt for the industry isn’t going to be renegotiated until after 2017. If there is ever going to be a run in oil, now is the time for it to happen.

My basis for short XLE, which comprises 50% of my current holdings, is a touch of $63. Moreover, I will short more if Exodus spits out another overbought signal from now until next Monday, which is when the entirety of my position is scheduled to be closed out. But understand something, I do not believe the cataclysm is coming for the sector just yet.

That, my friends, will happen in August.