Please Sit Down as We Take a Closer Look at the Energy Market
Energy prices have been soaring. This is old news to anyone who drives a car, truck or heats their home with oil or gas.
Consumers, I believe, are stunned. I can see some people complaining (a euphemism) on social media. Only a few people are calling for a boycott of Russian crude as perhaps they don't know if they can afford it. The lines for gasoline at places like Costco (COST) and BJs (BJ) appear to be longer as saving a nickel is important.
Nevertheless, we need to look at the charts.
In the daily bar chart of the (XLE) , the Energy Select Sector SPDR ETF, below, we can see that prices began to turn higher back in September. The XLE tested the rising 200-day moving average line in September and again in December. Prices are firmly above the rising 50-day moving average line as well as the rising 200-day line.
The trading volume has really ramped up the past two months. The On-Balance-Volume (OBV) line has been strong and recently made a new high for the move up. The Moving Average Convergence Divergence (MACD) oscillator is in a bullish alignment above the zero line.
In the weekly Japanese candlestick chart of XLE, below, we can see a bullish picture with no recent upper shadows and no reversal pattern. Prices are in a longer-term uptrend above the rising 40-week moving average line.
The trading volume has been increasing for several months. The weekly OBV line has been rising the past two years and the MACD is bullish.
In this daily Point and Figure chart of XLE, below, we can see a $100 price target.
In this weekly Point and Figure chart of XLE, below, we used a five-box reversal filter, which projects a $142 target.
In this daily Point and Figure chart of the continuous contract of the crude oil future (a series of contracts "linked" together) we can see a nearby price target of $119/bbl.
In this weekly Point and Figure chart of the continuous crude oil future, below, we can see a price target in the $216/bbl area.
Bottom-line strategy: In the late 1990s I had the pleasure of working at a sister company to the one run by Dan Yergin, the energy guru. I met him a number of times and was impressed with his insights. Recently Yergin told viewers of CNBC that, "This is a supply crisis. It's a logistics crisis. It's a payment crisis."
Like the 1970s I believe we are back in a world of economic warfare and everyone, I suspect, could underestimate the impact of recent events on the price of oil.
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