Energy’s Wild Comeback is Just Getting Started

Even as stocks corrected from their January highs, the tech sector remained at the top of every trader’s list.

The household-name Silicon Valley darlings and semiconductor stocks continued to attract most of the media attention during the first quarter. Market watchers eagerly scouted the FANGs for signs of life, effectively signaling that it was safe to dive back into the market on the long side.

But another rally was brewing under the market’s surface as tech hogged the spotlight. Now it’s bursting onto the scene with a vengeance as the herd begins to take notice…

A new energy rally is sweeping the market. It’s an emerging trend we’ve covered for the better part of the past eight months. Now it’s set to take the market by storm — and hand alert traders double-digit gains in the process.

We alerted you to oil quietly posting new three-year highs during the early part of the January stock melt up. The move capped off an impressive four-month comeback that shot crude to impressive gains of more than 32%.

Oil is back on the move after a quick reset during the February market correction. Crude continues its string of impressive milestones this week as it tops $70 per barrel for the first time since late 2014.

Oil Tops $70

Global events have perfectly aligned to support the surging oil price. OPEC has managed to successfully curb production over the past six months to help spur the rally. Strong energy demand is a factor as a robust world economy continues to hum along. Crude can also credit its rise to tensions surrounding Iran and Syria (you might remember that crude spiked in early April as Trump tweeted out threats of retaliation to Syria).

What’s even more impressive is that oil has managed to rally despite a surging U.S. dollar — which has completely crushed recent breakout attempts in gold and other commodities.

Naturally, oil’s big move is pushing energy stocks toward strong gains, with the Energy Select Sector SPDR (NYSE:XLE) popping higher by more than 9% in April alone. Energy shares also popped higher Monday as crude smashed through resistance at $70, only to retreat from breakout territory by late afternoon.

You already had the chance to grab onto the Energy Select Sector SPDR as it snapped its 2017 downtrend. The recent action in the energy sector continues to offer trading opportunities. But the move higher has been a choppy one. Despite oil reaching new highs to kick off the trading week, energy shares are remain stuck below their January highs.

Just check out oil services stocks, specifically the VanEck Vectors Oil Services ETF (NYSE:OIH). This sector jumped nearly 25% from its December lows during its New Year’s rally, only to cough up all its gains during the February correction. That’s some serious volatility!

We were quick to jump on the comeback in oil services names as it accelerated to begin the new trading year. At the time, we noted the move confirms its big breakout and would set the ETF for a run into the 30s in the coming weeks and months. Then the February swoon hit stocks hard — including our favorite energy plays.

Now, they’re finally fighting back toward our entry price. After a disastrous 2017, these stocks are looking to get back on track. Sure, the days of $100 oil are long gone. But as this volatile energy rally proves, the oil age isn’t dead just yet.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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