Don’t Forget About That Energy Breakout

A little bit over a month ago we pointed to the high likelihood of Energy breaking out on a relative basis. That consolidation that we had seen since September was just too tight and too clean for us to ignore. In addition, momentum as measured by RSI hadn’t reached oversold conditions since mid-summer. These bullish characteristics signaled to us that a breakout was probably coming.

Since then, we have seen $XLE relative to the S&P500 get above its downtrend line and hold above what are now rising 50 and 200 day moving averages (blue & red dotted lines). At this point, the price action is flirting with the September highs and remains in full fledged bull mode:

2-19-13 XLE vs SPY

We continue to think that this is in the beginning stages of a bigger shift towards Energy. Remember that this space had been underperforming for 2 years. This is no joke, we’re talking about energy here – not 3D printers and rare earth metals. These Energy names are some of the largest companies on the planet.

So keep these guys on your radar – Exxon Mobil ($XOM), Chevron ($CVX), Conoco ($COP). I don’t think this is over. And $OIH – the Oil Services Sector is doing something similar – Schlumberger ($SLB), Halliburton ($HAL), Transocean ($RIG). It looks to me like the relative outperformance is probably just getting going.


Also See:

Time For A Relative Breakout In Energy? (Jan 15, 2013)