Since the lows of March 2020, the stock market has made a huge rally and has broken to new highs in all the major indices. Trillions of dollars have been spent to keep the economy in a strong recovery and bullish phase. This has pushed most sectors beyond price levels from before the crash.
Now, with over half of the U.S population fully vaccinated, traveling has surged along with gas prices. However, the U.S Oil Fund ETF (USO) is one sector that never fully recovered. This could present another investment opportunity if gas prices continue to climb, along with its use.
One caveat leans back onto supply chain and scaling disruptions in travel-related industries. This includes companies such as airlines, car rentals and new car manufactures, which have struggled to increase inventory and find workers in order to keep up with demand.
Consumers have recently seen a large increase in prices, which could be off-putting to someone looking to travel or purchase a new vehicle. Therefore, this could be another hurdle for the oil industry to overcome, though it isn't a showstopper.
Having said that, by looking at USO's daily and weekly chart, we can see both the short- and long-term uptrends are intact. Additionally, MarketGauge's Real Motion indicator shows that momentum has broken out and held over its 50-period moving average. The weekly chart also shows that, from a long-term perspective, USO has a lot more space to grow before reaching pre-pandemic price levels.
If momentum continues to hold in Real Motion, USO and oil-related companies could see another wave of investors jump on the trend.
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ETF Summary
- S&P 500 (SPY): 425.46 high to clear.
- Russell 2000 (IWM): 221.13 support. 230.95 resistance area.
- Dow (DIA): 332.68 support.
- Nasdaq (QQQ): 342.80 support.
- KRE (Regional Banks): 63.63 support.
- SMH (Semiconductors): 245 support. 258.59 resistance.
- IYT (Transportation): 254.65 support.
- IBB (Biotechnology): Needs to hold 159 level. 163.63 resistance to clear.
- XRT (Retail): 96.97 needs to clear and hold.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
