Equipment Check:
There is a “rotation” going into some value-related sectors and energy is one of the beneficiaries. But if we “drill” a little deeper into the group, pun intended, we will see the equipment names (picks and shovels) are acting better than the ones in the exploration space. Over the last one month period the OIH is up by 12%, while the XOP has added 4%. Below is the daily chart of the OIH which is nearing a double-bottom pivot and has not recorded back-to-back daily losses in the last 4 weeks. The MONTLHY chart I feel has room to the 350 area by the end of Q3 where it may stall near the consecutive doji candles from August-September 2023 and the bearish dark cloud cover from this April. The chart here comparing the OIH and XOP shows the former overtaking the XOP for the first time since the start of April (they traded with a very strong correlation in February and March). Seasonality will be a tough sell, and perhaps investors were already positioned for that with a weak April, May, and June which have been strong over the last 4 years. Notice the extremely robust Q4 average gains of a combined 22%, although with big volatility as October and November which advance on average by 10 and 6.6% only CLOSED higher 50% of the time (2 of the last 4 years).