Energy Sector Underappreciated?

  • Most energy investors realize the recent past has been either feast or famine. It is easily seen here on the annual S&P sector performance chart dating back to 2009. Notice 2024, is following a predictable trend as being either at the top or more likely the bottom since 2014. The years of 2106, 2021, and 2022 have been standouts, albeit rare ones. Is 2025 likely to be another one dwelling in the cellar or will it be a creme of the crop scenario? Below we looked at the MONTHLY chart of the XOP, not the XLE, and firstly it demonstrates my belief in never purchasing falling knives until a bullish catalyst develops. That would have kept one out, at least long, from October 2018 until April 2020 with the piercing line candle. The energy space has been "dead money" in 2023 and 2024 and could be interpreted as opportunity cost too, but if one wants to paint it in a sanguine fashion they could declare it simply has been digested the 55 and 66% gains in 2021 and 2022. The bull flag in place would need to break above 160 to be considered a legitimate breakout, so there is still plenty to do, but this feels like a sleeping giant about to be woken up. Those stating the first Trump term was unkind to the space would be correct as it fell 7 straight months until it touched par then rocketed 60% before a precipitous drop. There will certainly be volatility in Trump's second term. That will be perceived as delightful or dreadful depending upon how well you take advantage of the opportunities.

Energetic Integration:

  • The integrated oil and gas names have been under pressure. The big visible names like CVX and XOM are now 14 and 16% respectively from their most recent 52-week highs. Perhaps the most attractive trait at the moment is their dividend yields in the 4% neighborhood. Both eked out small WEEKLY gains to end previous 4-week losing skids. International names like YPF have been positive outliers in 2024 and notice this one may be getting tired as it is not making much headway after a bull flag breakout, often a red flag. A gravestone doji candle on 11/15 and bearish RSI divergence in November and December adds to the cautious theme. All that being said this is a name that should be at the top of your watchlist if this pulls back into its rising 50-day SMA as it catches up in PRICE. Below is the daily chart of another interesting integrated play in CRGY. This carries a dividend yield of 3.5% and is above both its 50 and 200-day SMAs, something CVX and XOM can not claim. The WEEKLY chart shows it is now retesting a 2-year-long bullish ascending triangle breakout which carries a measured move to 18.5. Notice how from last November through this September it received excellent support at the very round 10 number. 

Recent Examples:

  • Coal names overall recorded a huge run after the KOL ETF was shut down just more than 4 years ago. In 2024 the action was weak overall as seen here on the performance chart, but CEIX was somewhat of an outlier. Below is the daily chart and how it appeared in our 11/22 Energy Note (the last one we did on the group). We were WRONG on the name but kept a very tight stop and the damage minimal. It looks like it could be setting up once again as it nears the very round par number which would double as 200-day SMA support. If one was to take a shot on the group stick with the leaders. It is now very oversold with a 25 RSI reading and in December thus far with 2 sessions left has advanced just 4 times. One caveat here is the MONTHLY chart which is recording a bearish engulfing candle so far but is holding above the bull flag pivot at 100. If one does get involved use a CLOSING stop below 95.

Special Situations:

Baker Hughes:

  • Energy equipment play up 19% YTD but lower 6% over last one month period. Dividend yield of 2.1%.
  • Name 10% off most recent 52-week highs and WEEKLY chart shows holding the big week ending 11/8 gain of 14% well. Notice strong action against OIH peers since the start of 2024. Expect the relationship to continue.
  • Earnings reactions mixed up 2.8 and 5.8% on 10/23 and 7/26 after losses of 1 and 4.7% on 4/24 and 1/24.
  • Enter after gap fill/bullish piercing line candle.
  • Entry BKR here.  Stop 39.

Tidewater:

  • Energy equipment play down 29% YTD and up 2% over last one year period.
  • Name 54% off most recent 52-week highs and WEEKLY chart rose 5% last week on uncertain tape. Slight positive RSI divergence and week ending 12/20 recorded bullish inverted hammer candle. First 3-week win streak since 9 consecutive week run weeks ending between 2/9-4/5.
  • Earnings reactions mixed off 12.6 and 3.6% on 11/8 and 8/7 and rose 13.4 and 14.4% on 5/3 and 3/1.
  • Enter after break ABOVE bear flag/recapture of very round number.
  • Entry TDW here.  Stop 48.

Antero Resources:

  • Natural gas play up 47% YTD and rose 8% last week.
  • Name 8% off most recent 52-week highs and WEEKLY chart shows add-on above 34.75 cup with handle pivot. Up 5 of the last 8 weeks with big gains including moves of 14, 8, and 8%. Other 2 advancers gained 4%.
  • Earnings reactions mixed off 8.3 and .9% on 10/31 and 8/1 and rose 6.2 and 10.9% on 4/25 and 2/15.
  • Enter with buy stop above double bottom base.
  • Entry AR 33.57.  Stop 31.25.

Good luck.

Entry summaries:

Buy after gap fill/bullish piercing line candle BKR here.  Stop 39.

Buy after break ABOVE bear flag/recapture of very round number TDW here.  Stop 48.

Buy stop above double bottom base AR 33.57.  Stop 31.25.

This article requires a Chartsmarter membership. Please click here to join.

Energy Sector Underappreciated?

  • Most energy investors realize the recent past has been either feast or famine. It is easily seen here on the annual S&P sector performance chart dating back to 2009. Notice 2024, is following a predictable trend as being either at the top or more likely the bottom since 2014. The years of 2106, 2021, and 2022 have been standouts, albeit rare ones. Is 2025 likely to be another one dwelling in the cellar or will it be a creme of the crop scenario? Below we looked at the MONTHLY chart of the XOP, not the XLE, and firstly it demonstrates my belief in never purchasing falling knives until a bullish catalyst develops. That would have kept one out, at least long, from October 2018 until April 2020 with the piercing line candle. The energy space has been "dead money" in 2023 and 2024 and could be interpreted as opportunity cost too, but if one wants to paint it in a sanguine fashion they could declare it simply has been digested the 55 and 66% gains in 2021 and 2022. The bull flag in place would need to break above 160 to be considered a legitimate breakout, so there is still plenty to do, but this feels like a sleeping giant about to be woken up. Those stating the first Trump term was unkind to the space would be correct as it fell 7 straight months until it touched par then rocketed 60% before a precipitous drop. There will certainly be volatility in Trump's second term. That will be perceived as delightful or dreadful depending upon how well you take advantage of the opportunities.

Energetic Integration:

  • The integrated oil and gas names have been under pressure. The big visible names like CVX and XOM are now 14 and 16% respectively from their most recent 52-week highs. Perhaps the most attractive trait at the moment is their dividend yields in the 4% neighborhood. Both eked out small WEEKLY gains to end previous 4-week losing skids. International names like YPF have been positive outliers in 2024 and notice this one may be getting tired as it is not making much headway after a bull flag breakout, often a red flag. A gravestone doji candle on 11/15 and bearish RSI divergence in November and December adds to the cautious theme. All that being said this is a name that should be at the top of your watchlist if this pulls back into its rising 50-day SMA as it catches up in PRICE. Below is the daily chart of another interesting integrated play in CRGY. This carries a dividend yield of 3.5% and is above both its 50 and 200-day SMAs, something CVX and XOM can not claim. The WEEKLY chart shows it is now retesting a 2-year-long bullish ascending triangle breakout which carries a measured move to 18.5. Notice how from last November through this September it received excellent support at the very round 10 number. 

Recent Examples:

  • Coal names overall recorded a huge run after the KOL ETF was shut down just more than 4 years ago. In 2024 the action was weak overall as seen here on the performance chart, but CEIX was somewhat of an outlier. Below is the daily chart and how it appeared in our 11/22 Energy Note (the last one we did on the group). We were WRONG on the name but kept a very tight stop and the damage minimal. It looks like it could be setting up once again as it nears the very round par number which would double as 200-day SMA support. If one was to take a shot on the group stick with the leaders. It is now very oversold with a 25 RSI reading and in December thus far with 2 sessions left has advanced just 4 times. One caveat here is the MONTHLY chart which is recording a bearish engulfing candle so far but is holding above the bull flag pivot at 100. If one does get involved use a CLOSING stop below 95.

Special Situations:

Baker Hughes:

  • Energy equipment play up 19% YTD but lower 6% over last one month period. Dividend yield of 2.1%.
  • Name 10% off most recent 52-week highs and WEEKLY chart shows holding the big week ending 11/8 gain of 14% well. Notice strong action against OIH peers since the start of 2024. Expect the relationship to continue.
  • Earnings reactions mixed up 2.8 and 5.8% on 10/23 and 7/26 after losses of 1 and 4.7% on 4/24 and 1/24.
  • Enter after gap fill/bullish piercing line candle.
  • Entry BKR here.  Stop 39.

Tidewater:

  • Energy equipment play down 29% YTD and up 2% over last one year period.
  • Name 54% off most recent 52-week highs and WEEKLY chart rose 5% last week on uncertain tape. Slight positive RSI divergence and week ending 12/20 recorded bullish inverted hammer candle. First 3-week win streak since 9 consecutive week run weeks ending between 2/9-4/5.
  • Earnings reactions mixed off 12.6 and 3.6% on 11/8 and 8/7 and rose 13.4 and 14.4% on 5/3 and 3/1.
  • Enter after break ABOVE bear flag/recapture of very round number.
  • Entry TDW here.  Stop 48.

Antero Resources:

  • Natural gas play up 47% YTD and rose 8% last week.
  • Name 8% off most recent 52-week highs and WEEKLY chart shows add-on above 34.75 cup with handle pivot. Up 5 of the last 8 weeks with big gains including moves of 14, 8, and 8%. Other 2 advancers gained 4%.
  • Earnings reactions mixed off 8.3 and .9% on 10/31 and 8/1 and rose 6.2 and 10.9% on 4/25 and 2/15.
  • Enter with buy stop above double bottom base.
  • Entry AR 33.57.  Stop 31.25.

Good luck.

Entry summaries:

Buy after gap fill/bullish piercing line candle BKR here.  Stop 39.

Buy after break ABOVE bear flag/recapture of very round number TDW here.  Stop 48.

Buy stop above double bottom base AR 33.57.  Stop 31.25.