It may be time to start looking at oil again.
Oil prices have been rising recently due to a number of factors:
- Escalating conflict in the Middle East
- Concerns about potential disruptions
- Broader geopolitical tensions
- Sanctions on oil producing countries, such as Iran.
In addition, over the longer term, the global demand for oil and energy is expected to rise significantly, with the U.S Energy Information Administration (EIA) anticipating a rising demand through 2050, primarily driven by increases in population and incomes.
Looking at the Energy Sector (XLE – which is heavily weighted with traditional ”Big Oil” names) and Brent Crude Oil Futures, we can see short-term price and momentum/relative strength starting to rise in both technical charts:
Energy Sector (XLE) – Weekly Chart
Brent Crude Oil Futures – Daily Chart
Of the top 10 weighted holdings in the Energy Sector (XLE), Exxon Mobil (XOM) is weighted #1 (23.6% of net assets) and should benefit as fund managers add to their existing positions as demand for oil increases.
Exxon Mobil (XOM) – Weekly Chart
As of this writing, (XOM) on a weekly basis is:
- Showing increasing momentum/relative strength coming in underneath
- Starting to move/close above the former 2023 & 2024 weekly closing prices
- Breaking up above a technical consolidation/triangle pattern
We currently are bullish Exxon Mobil (XOM) – both from a near-term trading and long-term investment perspective.
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