We’ve been bullish on oil for more than a year. As recently as late July, we summed up our bullish thesis, here.
Our patient bullish position in oil is really starting to pay off… and now that rising tide is lifting the energy stocks along with it.
First let’s take a look at the latest signals on oil.
Oil traded near its 52-week high this week. After hitting its Stock State Indicator (SSI) Stop signal in September 2014 at $91.67, oil dropped for more than two years before triggering a new SSI Entry signal in October 2016 at $49.18.
Oil hasn’t traded at this level since dropping below $55 in the middle of 2015. The volume-at-price chart shows that if the price of oil can stay above the $55 level, it could move up to $60 in the near-term.
The strongest long-term time-cycle continues to be bullish for the next two years.
Oil itself is riskier than most investors are prepared to deal with. The Volatility Quotient (VQ) on WTI crude oil is 32.5%. Oil stocks, on the other hand, tend to be less risky than oil itself… and many of them are starting to turn Green.
XLE is the Select Sector ETF for the energy sector. It includes some of the largest companies in the world including Exxon, Chevron, and Schlumberger. The VQ of XLE is only 17.9%.
XLE is the only SPDR Sector ETF that’s currently in the SSI Red Zone after it got barely stopped out over the summer. But XLE is moving higher again and will likely be triggering a new SSI Entry signal again soon.
The top ten holdings of XLE show that six stocks are in the SSI Green or Yellow Zone and only four are in the SSI Red Zone.
In this long-running bull market, it’s difficult finding opportunities that are just entering the SSI Green Zone. And, as you know, I like investing in stocks when they’re Going Green.
It looks like XLE is going to turn green again soon and many individual component stocks of XLE are already green or looking like they will also turn green again soon.
Energy stocks have been beaten down for years now but it looks like they are finally trending up again. I’m paying attention. I suggest you do too.
Have a good weekend,
Richard Smith, PhD
CEO & Founder, TradeStops