It has been over 1,600 days since Crude Oil futures traded below zero in 2020, which preceded one of its best 2-year bull markets in history.
Since the peak in early 2022, energy has been a tough trade for those with trend-following strategies and a favorable one for mean-reversion strategies.
Crude Oil futures are at the lower bound of a multi-year range, and the Energy Sector SPDR $XLE has the fewest percent of stocks above their 200-day moving average out of all 11 sectors.
Energy has been a laggard recently.
However, it's important to remember where energy has come from. Crude Oil futures went from below 0 to 130 in less than two years, and the XLE is the second best-performing sector since Covid, lagging only Technology $XLK:
The outperformance has been in the energy sector. Just not recently...
But that could be changing soon with energy futures digging in at major levels of interest.
Crude Oil futures are bouncing off a key level of polarity:
You can see how price reacted when it was at this level before 2020 and how price is now reacting at this same level today.
Heating Oil futures look very similar structurally to Crude Oil:
The bulls have stepped in down here and are driving the price of diesel higher at a key level of interest going back multiple years.
And if Crude Oil and Heating Oil are holding these levels, then Gasoline probably isn't breaking down:
RBOB has experienced a relatively larger move to the downside recently, but it could trigger a failed breakdown signal any day now and begin a new leg higher.
These charts do not look like distribution patterns. Rather, they look more like consolidations in the context of a longer-term bull market.
We may be early here, but we want to continue betting that the long-term trend is higher for energy commodities and equities until the market proves us wrong.
Are you buying energy down here?
Today, we're outlining an energy stock making new all-time highs for Trade of the Week:
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