CRUDE OIL IS TRADING OVER $55 FOR FIRST TIME IN TWO YEARS -- THAT'S BOOSTING ENERGY SHARES -- OIL & GAS EXPLORATION AND PRODUCTION SPDR IS ENERGY LEADER -- XOP LEADERS INCLUDE CONCHO RESOURCES, EOG RESOURCES, AND DIAMONDBACK ENERGY
WTIC CRUDE OIL ATTEMPTING BULLISH BREAKOUT OVER $55... My Wednesday message showed Brent Crude Oil trading over $60 for the first time in more than two years. Brent is trading over $62 today. It also showed West Texas Intermediate Crude Oil (WTIC) trying to break through overhead resistance at $55. Chart 1 shows WTIC trading slightly above that resistance barrier today ($55.69). If it's able to hold above that level, that would mark its first close over $55 in two years. That would be an impressive upside breakout and would lend more support to energy shares.
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Chart 1
S&P OIL & GAS EXPLORATION AND PRODUCTION SPDR LEADS ENERGY SECTOR... My Wedneday message also showed the Energy Sector SPDR (XLE) on the verge of reaching a new six-month high. The XLE has actually been rising faster than the S&P 500 over the last two months. It should do even better if WTIC completes its bullish breakout. But there's another energy ETF that's doing even better than the XLE. Chart 2 shows the S&P Oil & Gas Exploration & Production SPDR (XOP) already trading at the highest level since May. And it just cleared its 200-day moving average. What caught my attention, however, was the fact that the XOP is rising much faster than the XLE. That can be seen by the XOP/XLE relative strength ratio in the top box which has experienced an upturn of its own. Since the start of September, the XOP has outpaced XLE by an 18% to 10% margin. Both have outpaced the 5% gain in the S&P 500 over the same two month period.
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Chart 2
CONCHO, EOG, AND DIAMONDBACK ENERGY ARE XOP LEADERS... Several individual stocks in the XOP are showing strong chart patterns. I've chosen three to show here because of their leadership qualities. Chart 3 shows Concho Resources (CXO) trading at the highest level in eight months. Its relative strength ratio (top of chart) is also rising. Chart 4 shows EOG Resources also in a strong uptrend with a rising RS line. Chart 5 shows Diamondback Energy (FANG) also rising on both an absolute and relative basis. Other stocks supporting the XOP rally that are not shown include Continental Resources (CLR), Devon Energy (DVN), and Marathon Oil (MRO). With stock indexes hitting record highs again today, money continues to search for undervalued stock sectors that present relative bargains. That would include energy which has been the year's weakest sector. That's especially true if energy prices keep rising and start attracting more media attention. That should pull more money into the energy patch.
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Chart 3
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Chart 4
