EarningsBeats.com Digest for April 13, 2022
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Energy Appears To Be Running Out Of Gas
I think it's too early to give up on the energy sector (XLE), but after a solid start to 2022, it certainly appears that the XLE could be due for a rest. After nearly a decade of significant underperformance, it seemed as though the XLE would never go up again. Now after an incredible run and tripling from just 18 months ago, it looks like the
momentum will never stop. Well, the momentum is exactly the problem right now. Check this out:
Prices continue to rise, but you can see from the chart that the PPO is declining rather rapidly, a signal of slowing price momentum. Also, in the next panel, you can see that the relative strength vs. the S&P 500 has not reached a new high, while the absolute price has. Is Wall Street using the latest strength in the XLE to unwind positions? that could be the case. Finally, the huge rise in crude oil prices ($WTIC) were a big reason
for XLE's outperformance. But since hitting $130 per barrel in early March, crude has fallen back to just over the $100 per barrel level. Crude oil seems to have fairly solid price support near $93 based on the successful tests of that level in both March and April. Another drop in crude, this time clearing that support level, would likely lead to further relative weakness in the XLE.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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