Very Heavy Group Turning?
Below is a good illustration of what pure play energy investors have been going through for nearly 6 years now. Notice that 4 of the last 5 years the group has been at the bottom, or second from dead last against other major S&P sector peers (2016 was the outlier obviously as it was the best actor). Through the first half of this year the pattern is holding true and demonstrating very clearly that trends once in motion tend to stay that way, more likely than they are to reverse. The XLE has been near the bottom of the cellar recently too as it IS the worst performing of the 11 major sectors presently, but for the first time this year its 200 day SMA, a way many define the simple trend, is curling higher. The ETF is still in bear market mode down 21% from most recent 52 week highs, but has been recording bullish bottoming candlesticks, with a bullish morning star completed on 8/16, a piercing line on 10/3 and a doji candle last Wednesday. There could be good risk/reward here to the upside with 3 higher lows on the WEEKLY chart since last December, but a move below 55 could easily have the fund resuming its downtrend with intensity.
Sun Setting On Solar?
The saying goes in the markets things always look rosy at the top. I am not a big believer in that, but that is what could be transpiring with solar, via the TAN ETF. After a very robust move of more than 80% during a 27 of 39 week winning streak between the weeks ending 12/28/18-9/20 there are some warning signs popping up. The week ending 9/27 barely missed registering a bearish engulfing candle, but did implode declining 9.1%, its largest weekly loss since the week ending 2/12/16. It pierced its 50 day SMA to the downside twice in the last 5 weeks, in heavy volume. Top holding SEDG is trading is holding up relatively well, but the 2nd and 3rd largest components in FSLR and ENPH are trading 20 and 32% off their most respective 52 week highs. The round 3o number is currently presenting problems for the fund, and it did not participate in todays firm tape, often a tell.
We have not focused too much on energy, as the space has been a laggard. If the arena turns around, one wants to hone in on names that held up somewhat well. A potential example is the chart below of WHD and how it appeared in our Energy Note last month. It is a relatively recent new issue, coming public 20 months ago, and we know how IPOs have fared as of late. It is among the very weak oil services group, and Cactus itself is now 31% off most recent 52 week highs. The stock has registered FIVE consecutive positive earnings reactions higher by 2.1, 6.4, 1.4, 4.8 and 4% on 8/1, 5/2, 3/7, 11/1 and 8/2/18. On its daily chart it is holding the 50 day SMA for 5 weeks now, a good feat among a weak overall group. Stay constructive on WHD as long as this double bottom on the WEEKLY chart below holds up.