Energy sector ready to shift from Laggard to leader on weaker US dollar, oil

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Energy stocks, measured by the Select Sector SPDR ETF (NYSE :), performed terribly in 2019. The ETF has increased by only 6% this year, compared to one that has increased by more than 26%. However, this poor performance can change, with the ETF going up by no less than 13.5% in the coming months and weeks.

The group could see a benefit in the future from a weaker US dollar and rising oil prices. In addition, the two largest companies in the sector are Exxon Mobil Corp (NYSE 🙂 and Chevron Corp (NYSE :), may also be late are for a rebound.

Energy ETF

The Energy ETF has recently risen above two technical downtrends that were already present. The first downward trend began in November 2018, while the second downward trend began in April 2019. Now the ETF is starting to rise higher and if it exceeds a level of technical resistance at $ 63.60, it could rise to $ 68, 90. It would yield a profit of around 13.4%.

That is not all, because it seems that the ETF may also have formed a bullish reversal pattern, known as a double bottom. The stock formed this pattern during a period between August and October 2019. It would also suggest that the XLE moves higher.

Moreover, the trend for the relative strength index has also changed direction. The RSI has been consistently higher since December 2018 and has reached a series of higher lows, despite the ETF tests and previous lows being retested. This higher positive trend is known as a bullish divergence, and it would suggest that the ETF rises in the longer term.

SPDR energy selection sector Daily price chart

The Dollar

One reason why the ETF may move higher is that the US dollar has recently shown signs of weakening. The, which measures a basket of currencies against the dollar, has fallen under a critical upward trend that began in September 2018 and peaked at around 99.70 in early October 2019. Now the dollar index is falling below an upward trend around a level of 97.50 and runs the risk of falling to 95.10, as noted earlier. Should the dollar weaken, this could help to raise its price, which recently indicates its own bullish trends.

U.S. Pat. Dollar Index Daily Graph

Exxon Mobil

Exxon also shows positive trends, which have a weight in the Energy ETF of approximately 22%. The share has also had a terrible 2019, with an increase in shares of around 3%. But the equity seems to have reached a solid floor at a price of $ 67, because it has tested that support level several times since August. In addition, the RSI for Exxon is also starting to show a higher trend and showing signs of bullish momentum entering the shares.

Daily price chart for Exxon Mobil

Chevron

Chevron also has a significant weighting in the ETF, with around 21%. Like Exxon, Chevron will have a hard time in 2019, with its shares at around 9%. Chevron & # 39; s shares are in a consolidation period that dates back to early 2018. The chart appears to form a bullish continuation pattern known as a symmetrical triangle, suggesting that shares will rise in the future. For this to happen, however, the stock must rise above the downward trend that formed in May 2018.

Daily price chart for Chevron

While the energy sector is likely to have a lot of work to do in the coming weeks and months to move from a market lag to a market leader. There are indications that the misery of 2019 might become more favorable in 2020.

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