Buy XLE for a Potential Price Breakout Opportunity

The Energy Select Sector SPDR Fund ETF (XLE) was recommended as a long-term investment at the start of January. Investor sentiment supports a potential price breakout for XLE, making it a good opportunity to buy before the breakout occurs.

Investor sentiment has been bullish for The Energy Select Sector SPDR Fund ETF (XLE), suggesting a potential price breakout. The ETF, which tracks the performance of the energy sector, has been in a three-year trading range since its surge off COVID-19 lows in 2020 [1]. The recent dip in March, driven by talk of tariffs, has brought the price back to January lows, but sentiment indicators have become even more bullish, presenting investors with a second buying opportunity.

Warren Buffett's advice to "be fearful when others are greedy and be greedy when others are fearful" aligns with the current market conditions. The 'puts to calls' ratio, a key indicator used to measure investor sentiment, shows that investors are currently too bearish, which is bullish for the market [1]. This ratio, calculated over a 20-day period, has indicated six times in the last seven years when the market was poised for a breakout.

The Energy Select Sector SPDR Fund ETF (XLE) has total assets close to $30 billion and an SEC distribution yield of 3.4%, making it behave like a utility. Additionally, oil stocks serve as a good long-term inflation hedge, a trait that has been beneficial in the past and may continue to be so in the future [1].

Investors should consider the potential risks associated with this opportunity. The use of leverage can amplify both gains and losses, and the Fund is not suitable for all investors. It is designed for knowledgeable investors who understand the risks and are willing to monitor their portfolios frequently. For periods longer than a single day, the Fund will lose money if the Underlying Stock’s performance is flat, and it is possible that the Fund will lose money even if the Underlying Stock’s performance increases over a period longer than a single day [1].

In conclusion, investor sentiment suggests a potential breakout for XLE, presenting a good opportunity for long-term investors. However, investors should carefully consider the risks and ensure that this investment aligns with their overall financial goals and risk tolerance.

References:
[1] https://www.globenewswire.com/news-release/2025/05/16/3083177/0/en/Leverage-Shares-by-Themes-continues-product-expansion-with-a-new-single-stock-Leveraged-ETF-bringing-investors-an-exciting-opportunity-to-amplify-exposure-to-Broadcom-AVGO.html
[2] https://seekingalpha.com/article/4788044-another-opportunity-to-buy-xle-before-a-price-breakout