ETF of the Day - Oil Service

The HOLDRS Oil Service ETF ($OIH) is up 2.2% today and is rallying to the best level since last February. The rally today has the ETF at a level that has been a significant area of resistance in the past and the next couple of weeks will be important for the entire sector.

The ETF is a basket of 26 stocks involved in the oil service sector. The top three holdings are Schlumberger ($SLB), Halliburton ($HAL), and National Oilwell Varco ($NOV). They make up a 39% of the ETF; a high concentration for the top holdings and potentially a concern for investors.

The expense ratio is 0.35% and the year-to-date return is an impressive 15.5%.

As the search for oil expands to deep water offshore sites and the shale boom around the globe continues it bodes well for the stocks in this sector.

Below is a chart of the ETF over the last 2 years and it shows how it has continually failed to break out of the $45 area. When the ETF finally breaks above the resistance level it will be significant because it will trigger a buy signal. Techincally speaking the breakout will be out of an Inverse Head and Shoulders Pattern - which is Very Bullish.

My opinion at this time is to hold and if $OIH can breakout, look to initiate a new position.