The Sector To Watch In 2018

As the year comes to an end I am running through and cleaning up all my watch lists. After organizing my Energy list, I can’t help but feel there is an alpha look to the sector to come in 2018.. something similar to that early 2016 Gold Miner sector rip.

Year to date 2017, Energy is the only S&P sector looking to end the year negative. What I find interesting is the disconnect between Crude itself and Energy stocks YTD:
– Crude up 14.1%
– XLE down 4.9%
– XOP down 10.5%
– OIH down 24.0%
– PSCE down 28.1%

It is important to note energy stocks as a whole put on an impressive rally into year end after bottoming in the summer where XLE was down nearly 20%. I can’t help but feel Energy stocks will look to close this gap going forward.

Most of 2017 I ignored any Energy strength because, as usual, strength was quick to be reversed. Over the past few weeks, the rally has stuck and now has my attention. Sure I may be “late” to this but I don’t try to catch exact bottoms. If this move is for real, there will be plenty of upside left and it is the monthly charts that have me excited.

XLE relative to SPY has held its ground well and a false breakdown may be in the works. There will be plenty of upside to come if Energy as a group starts outperforming the overall market.

XLE.SPY.png

It is also positive and confirmatory to see similar strength in base metals such as copper, aluminum, steel and their individual stocks – AA, FCX, VALE, etc. – that this is more of a theme than just a counter rally.

Also, take a look at the Brazilian Bovespa trading at ATHs.. not bearish for these sectors.

BVSP.png

It’s clear Oil has bottomed. Going forward, I see resistance at 60 along with a downward sloping 200 week nearby. Where we go I don’t know but its been nearly 4 years since the start of the oil collapse. Price action has taken it’s time to sort itself out after getting crushed -75%. A breakout here would be huge.

CLv2.png

Oil Services, the worst of the group, held important 2008 and 2016 support which is positive to see.
OIH.png

While I don’t want to make this post too long with 10 charts that look promising.. overall there are plenty of energy names breaking to ATHs while many continue to ATLs. I care about the names showing relative strength now in assumption that their trends and outperformance will continue if the sector move does as well. Patience is key to me as I am not in from lower.

I will tweet out charts I like as they prove entries. Lets see what happens in 2018!

Thanks for reading.

 

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