Trade of the Day: Ride Oil’s Rally With VDE

Vanguard Energy ETF (NYSEARCA:VDE) — Shares of VDE jumped 0.9% on Monday as oil prices rose 2.8% to $45.74 a barrel. This fund is an ideal vehicle for investors who want to participate in the upside potential of the energy sector but have no experience trading commodities themselves.

Top 10 holdings in VDE are well-known names: Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Schlumberger Limited. (NYSE:SLB), Occidental Petroleum Corporation (NYSE:OXY), ConocoPhillips (NYSE:COP), EOG Resources Inc (NYSE:EOG), Halliburton Company (NYSE:HAL), Phillips 66 (NYSE:PSX), Kinder Morgan Inc (NYSE:KMI) and Anadarko Petroleum Corporation (NYSE:APC).

In the past three sessions, oil has rallied nearly 10%. This has prompted more and more analysts to say that there is a high probability that the January low at $32.85 a barrel was a bear market low. Additionally, the increase in the U.S. rig count is an indication that crude oil is headed higher.

Further gains in oil prices could result from continuing rumors that the Saudis and other top producers are considering a cap on production, which would work off reserves.

Turning to the chart, we see that VDE confirmed a reversal from a low in January on a very high-volume day of buying. The longer-term uptrend is further supported by a golden cross in May and a run to the resistance line at $96 to $98. Triple buy signals from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), mark a bullish reversal from a consolidation at the 20-day moving average at $88.

Traders should attempt to purchase shares of VDE at $96 with an objective of $110 for a potential return of nearly 15%. Investors can also add this ETF to their long-term portfolios as a cornerstone investment in the energy group. VDE is rated a four-star fund by Morningstar and has a yield of 2.4%.

VDE Chart
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