Crude Oil and Other Energy Names have Struggled in 2025. What's Next?
Energy has found itself in the bottom half of NDW’s DALI sector rankings since the start of 2024. While the sector as a whole has seemingly made a nice attempt of putting in some bottoming formation around 2025 lows, we will use today’s Pulse as a launching pad to answer the question: How should one play exposure to a weak sector? In this case, underweighting energy may simply mean avoiding exposure completely for now, but there may be a time in the future that clients will still want/desire allocation to a sector, even when price is telling us the space doesn’t have relative strength. With that in mind, we will offer a brief technical review of the energy sector as a whole and then offer a few suggestions on how you can utilize the NDW platform to find ideas within weak sectors.
Before doing so, we will jump into a quick technical comment for both Crude Oil (CL/) and a broad equity representative XLE. CL/, having fallen nearly 14% so far this year, has quite an interesting technical picture on its default chart. After breaking through significant multi-year support in the mid-$60’s, that point has acted as a stiff point of resistance over the last 2 months. As prices of energy based commodities, particularly crude, typically impact the energy focused equity group, headwinds for CL/ could easily impact more traditional energy names you may find in your portfolio. While XLE is roughly flat for the year, the fund has somewhat of a similar picture on its default chart. While bulls should be encouraged by the productive move off lows in the mid-upper $70’s, older support around current levels between $84 & $86 have been a tough point to cross. Pair this with the negative trend line, 50-day moving average and poor 1.83 fund score and the overall space remains one to avoid. Point being, it can be quite easy to fall for a flash in the pan with the near 15% chart move for the fund but it is important to remember that the longer-term picture is still quite bleak.
Luckily, there are a few different options available for those of you looking for technically strong options within specific sectors. We will focus on the Buy Lists, which essentially break down premade screens by respective sector/asset class. In this case, we can focus on the 11 large/mid cap energy stocks that have technically strong technical scores, but there are other premade options available that span across the investable universe. EXE offers quite an interesting technical picture, having rallied back up to all-time chart highs from the start of April. Earning 4/5 technical attribute points, the stock sits on a pair of consecutive buy signals and offers support just below current levels at $102.
