An Energized Space:
The energy group is having a strong 2019, albeit it is obviously early and coming off a deep correction. With 2 months in the books, the XLE is trailing just the industrials, having advanced almost 15%, outshining both technology and consumer discretionary. There is a catch to this like we mentioned as the ETF is coming off depressed levels, still 17% off most recent 52 week highs. In contrast the XLY and XLK are just 6 and 7% off their respective highs. The XLE is underneath its 200 day SMA by nearly 5%, and if you do venture into this group demand best of breed names, with a short leash.
When Defense is Offense:
As bull markets mature we know from experience toward the tail end of a run investors tend to look for safety. It could emanate from big cap healthcare plays that produce big dividends and stability. The supertanker oil plays are another avenue for participants to deploy capital. This may explain the action in the ratio chart comparing the XLE to the XOP. Keep in mind XOM and CVX represent 40% off the XLE and both trade just 9 and 8% from their most recent highs. The more nimble and higher beta plays like a FANG and DVN, both top 5 holdings in the XOP, are wallowing 25 and 36% from their recent peaks.
It is always a very good idea to monitor new issues that come public as many are under followed. One usually has to give a young name time to carve out a proper base, but once it does the potential rewards await. If the name becomes a best of breed in its own group, even better. Below is an example of WHD and how it appeared in our 1/29 Energy Report. The stock has since taken out its 200 day SMA, and has now formed a handle with a 37.95 pivot on its current double bottom base. It trades 10% off most recent 52 week highs, while older peers SLB and HAL are both more than 40% off their own.