Oil & Gas - The New Momentum Stocks

I'm going to stick with what I think are the most important charts to watch in the first quarter of 2022. So far I've covered copper and tech stocks. Now it's on to oil.

While the stealth bear market continues across sectors and industries like Solar -43%, Biotech -32%, Renewables -30%, and Gambling -35%, there's always a bull market somewhere and right now that bull market is alive and well in Crude Oil.

Remember when oil went negative? Now it looks like crude oil is well on its way to $100 a barrel. Talk about a turnaround. 

What about oil and gas stocks? How are they behaving?

We are only three weeks into 2022 and oil and gas stocks have put up some serious numbers...

They are off to a terrific start, especially when compared to the indices with the NASDAQ down nearly 7%, the S&P 500 4%, and the Russell 2000 6.5%.

And this happened with very little fanfare as it seems a lot of investors and traders remain fixated or distracted by some of the shiny objects in technology, software, and crypto.

Take a look at how US and Canadian oil and gas stocks (XLE & XEG) have performed in comparison to big tech (QQQ), Software (IGV), Bitcoin, and the ARK Innovation Fund (ARKK) over the last 12 months...

So, how does this play out moving forward? Can this outperformance continue?

In my experience, an object in motion tends to stay in motion and the longer-term trend is clearly intact.

However, there will be bumps along the way and in the short-term oil and gas stocks may have gotten a bit ahead of themselves so a pullback should be expected. 

Another factor to consider in the short term are the major indices. If we continue to see weakness in the S&P 500 and NASDAQ it may eventually spread to the strongest sectors like energy, as investors move aside and become more risk-averse.

From a technical and longer-term perspective, we want to be long or remain long XEG and XLE above the following levels...

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Nothing in this blog post should be considered investment advice and is provided for educational and entertainment purposes only. The commentary and information represent the opinion of the author and are not recommendations to buy or sell any security or investment product. The author may or may not hold positions in the securities and investments mentioned. Full disclaimer here.