CRUDE OIL IS NEARING ANOTHER THREE-YEAR HIGH AND BOOSTING ENERGY SHARES -- ENERGY SPDR IS BOUNCING OFF MAJOR TRENDLINE SUPPORT AND 200-DAY AVERAGE -- OIL SERVICE ETF IS EVEN STRONGER -- ENERGY LEADERS ARE TRANSOCEAN, NATIONAL OILWELL, AND HESS
PRICE OF OIL NEARS THREE-YEAR HIGH... WTIC Light Crude is trading more than 2% higher today near $65. The weekly bars in Chart 1 (plotted through yesterday) show Light Crude Oil also nearing another three-year high. Brent crude is in a similar situation. Chart 2 shows the United States Oil Fund (USO) breaking out of a triangular formation to the highest level in seven weeks. A drawdown in energy inventories today is helping push oil prices higher. That's giving a boost to energy shares which have been lagging behind the commodity. And it's coming at a good time.
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Chart 1
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Chart 2
ENERGY SPDR IS TESTING MAJOR TRENDLINE SUPPORT ... Energy shares have been one of the year's weakest sectors. From a charting standpoint, however, they're in a major support area where new buying should start to emerge. That's especially true with the price of crude on the rise again. The weekly bars in Chart 3 show the Energy SPDR (XLE) starting to stabilize at a major support line drawn under its early 2016/mid-2017 reaction lows. Earlier this year, the XLE reached the highest level in three years. It fell sharply during February (along with the rest of the stock market). Despite that setback, the XLE has maintained its bullish pattern of "rising peaks" and "rising troughs" extending back to the start of 2016. The daily bars in Chart 3 show the XLE rising back above its 200-day average (red line) for the third time since early February. Its 14-day RSI line (top of chart) is rising from a February oversold condition below 30 and may be crossing over its midpoint line at 50. That usually signals more buying ahead. The XLE is up more than 2% today and is the day's strongest sector. Chart 3 shows the VanEck Vectors Oil Services ETF (OIH) with an even larger percentage gain of 4% today. It's also finding support near its 200-day moving average.
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Chart 3
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Chart 4
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Chart 5
TRANSOCEAN, NATIONAL OILWELL, AND HESS ARE ENERGY LEADERS... Not surprisingly, two of the day's biggest percentage gainers in the oil patch are in oil services. Chart 6 shows Transocean (RIG) surging more than 5% to the highest level in six-weeks today and about to cross over its 50-day average. Chart 7 shows National Oilwell Varco (NOV) reaching a two-month high and trading well above its 50-day line. Hess (HES) is in the integrated oil & gas group. But it's certainly one the day's energy leaders. Chart 8 shows that stock jumping over its 50-day line to the highest level in nearly two months. Investors looking to energize their portfolio with stocks that are relatively inexpensive and just starting to climb might want to take a look at the energy patch.
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Chart 6
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Chart 7
