Energy Exhaustion?

No one is going to argue where leadership has emanated from in 2022, and for that matter 2021 as well. Energy has been the stalwart and so far the strength within has been fairly even. On a YTD basis, the XLE (basically CVX and XOM) has advanced by 47%, while the XOP has jumped 43% (on a one-year lookback period the performance has been similar as well with the XOP better up 59% against the XLE up 57%). Of course, there is a difference in the dividend with the XLE paying twice what the XOP does at 3.1% compared to 1.5%. But the chart below may be showing some fatigue with some bearish candlesticks after a gigantic run for the XOP. In 2022 thus far it cracked its 50-day SMA on a CLOSING basis for the first time on 5/9 but quickly recaptured it which is what leading instruments do. If that were to occur again so quickly again that would be a red flag and a possible reason for caution. A visit to the 125 area would be probable, with a potential measured move back to 102.

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