The energy sector, which has been underperforming, is showing signs of recovery. Its relative strength has improved from last place to sixth, a level of improvement that has historically led to higher prices in seven out of eight cases over the next four weeks. Internal readings within the sector, such as breadth and the advance-decline ratio, are also improving, with the advance-decline hitting a new high. These positive developments are taking place in the bullish March-April time frame, with April historically bringing higher prices in the sector about 65% of the time, with an average gain of over 4%. Overall, from March 23rd through June 9th, prices have risen 72% of the time over the last 25 years.
Technically, the Energy Sector ETF (XLE) is showing signs of a potential breakout. The weekly strip shows a consolidation over the past 18 months, and a breakout could project a rally to 110, a 20% increase over the last quote. The resistance level seen on the monthly graph dates back to 2014, but there are higher weekly momentum lows indicating a bullish trend. The only negative aspect is the falling relative strength of the sector.
In terms of individual stocks within the sector, only about a third are outperforming. The top stocks for seeking gains through the spring include SM-St. Mary, NGS-Natural Gas Service, and MPC-Marathon. These stocks are showing higher lows in momentum on a weekly and monthly basis. St. Mary is showing relative strength improvement on a weekly basis, while Natural Gas Service and Marathon are showing new relative weekly highs. All three stocks are likely to add to their price gains as the sector continues to recover.
The energy sector as a whole has shown promising signs of improvement, with historical data suggesting a potential rally in prices over the coming weeks. The technical analysis of the Energy Sector ETF indicates a potential breakout, with resistance levels dating back to 2014. Individual stocks within the sector, such as St. Mary, Natural Gas Service, and Marathon, are showing positive momentum on both weekly and monthly charts, with potential for further price gains. Investors should keep an eye on the energy sector as it continues to recover and potentially provide opportunities for profitable investments.
