CRUDE BREAKOUT BOOSTS ENERGY SHARES -- OIL SERVICE STOCKS ARE LEADERS -- VALERO ENERGY IS TOP PERCENTAGE GAINER -- BAKER HUGHES AND EXXON MOBIL HAVE GIVEN P&F BUY SIGNALS.

OIL COMPLETES "DOUBLE BOTTOM"... Earlier in the week, I wrote about crude oil tracing out a possible "double bottom" just above long-term support at $40. In mid-day trading, crude is up $1.78 and has hit a new six-week high at $48.15. It has risen above its 50-day average and has broken a three-month down trendline. The next upside target is the late November peak just over $50. It looks to me like the downside correction is oil is over and that it's headed higher again. Energy stocks, which are today's strongest group again, are leading the commodity higher.

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OIL SERVICE LEADS ENERGY PATCH HIGHER... Oil service stocks remain the strongest part of the energy patch. The Oil Service Holders (OIH) are moving toward the upper end of a potential bullish "symmetrical triangle" (see converging trendlines). Its relative strength line has broke through its three month down trendline (see blue circle). All of this is good for the group and the sector. The Energy Select Sector SPDR (XLE), which is a broader measure of the entire sector, is also moving higher. It's RS line is trading over a rising 20-day EMA, which is a good sign. The XLE itself is breaking a down trendline start in late November. In my view, energy is probably the best place to be putting new money at this point.

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ENERGY LEADERS ... Yesterday I showed Noble Drilling and Rowan as possible oil service leaders. NE is trading at a new record today, while RDC has broken through its fourth quarter down trendline and is trading at a two-month high. Their rising relative strength lines also reflect their group and market leadership. Chart 6 shows Valero Energy which is today's top percentage gainer in the energy sector. The bullish chart speaks for itself.

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BHI AND XOM GIVE P&F BUY SIGNALS ... I showed bar charts of Baker Hughes and Exxon Mobil earlier in the week because they are two of the biggest stocks in the energy sector. Both are now on point & figure buy signals. The green boxes in Chart 7 (today's action) shows Baker Hughes exceeding two boxes of x's which gives the first buy signal since the start of the new year. Exxon Mobil is also on a p&f buy signal.

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