Energy Stock Bull Market Is Confirmed
Photographer: Andrey Rudakov/Bloomberg
© 2020 Bloomberg Finance LP
On November 9, 2020, I posted Energy Stocks Are Making A Longer-Term Low. This is a follow up and a guide for stock selection. The original projection was made largely based upon two factors. First was the seasonality that has been favorable since autumn. Second was the dynamic monthly cycle which has been rising. See the graphs below. The power of this cycle combination has lifted the Energy Select Sector SPDR Fund (XLE) XLE by about 40%.
Monthly Histogram of XLE Index
The sector is in a strong seasonal time span.
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Blue: Average Percentage Change
Red: Probability of a rise on that day
Green: Expected Return (Product of the first 2)
Monthly XLE Cycle Projection
This accurate cycle does not peak soon.
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The chart below lists the strongest stocks on a relative basis. The XLE index is used as a benchmark. This unique measure of relative strength utilizes several different optimized time periods rather than one.
The strongest relative stocks.
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The second part of the list.
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Below are the monthly graphs of three of the strongest stocks. All three show higher lows in momentum running back about ten years. Relative strength versus the XLE turned up in the autumn. Technically and cyclically, these stocks are poised to make further gains.
Callon Petroleum Monthly Chart
The stock is making a major upturn.
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Nabors Industries Monthly Chart
Note the long series of higher lows in momentum.
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SM Energy Company Monthly Chart
Relative strength is turning up after a weak nine-year trend.
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