Energy Stocks Need More Time

Alfonso Depablos, CMT
October 9, 2023

From the Desk of Alfonso Depablos @Alfcharts

Energy stocks have been the best-performing group thus far during the second half of 2023. However, they have given back some of their gains in recent weeks as selling pressure resurfaces.

With energy indexes rolling over at their old highs yet again, the question we’re asking (and have been asking) is simple… 

What is it going to take for these stocks to finally break out?

Here is a dual-pane chart showing the Equal-Weight Energy Sector testing the upper bounds of a multi-month basing pattern on both absolute and relative terms.

As you can see, sellers just showed up at the same place they did in June and November of last year, rejecting the recent advance and preventing bulls from taking control at this key resistance level.

Seeing prices on absolute and relative terms fail for the third time at such a critical area suggests buyers need more time to absorb the overhead supply before we get a decisive upside resolution.

We expect sideways and choppy price action for energy stocks until these ranges are resolved. If and when energy stocks make new absolute highs, we’ll be looking to the relative trend for confirmation. In other words, we want to see both of these ranges resolve higher in tandem.

We hope you enjoyed this post.

As always, we love to hear from you, so shoot us a note and let us know what you think.

Alfonso

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