Given the weakness of the broad energy sector, how can we add value to clients and identify stronger exposure within the weaker group?
Beginners Series Webinars
A new cycle of Beginner Series lessons will return again on Monday, September 8th, at 2:00 PM EST starting with a Point & Figure (PnF) Basics and Charting Overview.
Register for the series and attend the September 8th session for a chance to receive 3 months of an Elite subscription for free!
San Jose RS Institute: Register to join us in person for a 3-hour educational symposium on relative strength investing. This event is for financial advisors and will offer 3 hours of CFP/CIMA credit.
When: September 18th, 2025, 9 AM EST - 12 PM EST
Where: San Jose Marriott, 301 South Market Street, San Jose, CA 95113
Who: Speakers include...
John Lewis, CMT, Senior Portfolio Manager; Andy Hyer, CFP, CIMA, CMT, Client Portfolio Manager; Ian Saunders, Senior Research Analyst
Cost: Free! Lunch will also be provided.
Registration is limited to the first 75 advisors, so be sure to act fast!
One of the most effective ways to add value to clients is by selecting securities that outperform their benchmarks. Clients often need exposure to weaker sectors despite what relative strength dictates, so finding stronger areas within those broader groups can differentiate your services and generate alpha. Momentum strategies work best when there’s large dispersion between the best and worst performers within a group, enabling investors to own the winners while fading the laggards. Currently, the energy sector presents such an opportunity, despite its overall weakness.
The Energy Select Sector SPDR Fund (XLE) has shown improved in recent months, with it on a string of four consecutive buy signals and shifting to a positive trend in May. However, the broader group still looks poor despite its uptick. XLE holds an unfavorable fund score of 2.58, which is far behind the 4.08 score for the All US Equity Diversified group. Energy has ranked in the bottom three sectors of DALI for over a year and its currently in 10th. Additionally, most traditional energy companies move closely with the price of Crude Oil (CL/), and the commodity has recently moved lower. Crude returned to a sell signal and a negative trend in August, suggesting the path of least resistance remains to the downside for the commodity.
While the sector as a whole lacks strength, not all areas are created equal, with certain pockets looking more robust than even the broader market. Using our ETF buy list, there are several strong energy options to choose from, all of which could be categorized as non-fossil fuels energy funds. Clean energy has rebounded after an initial selloff spurred by reduced incentives in the Big Beautiful Bill, with the impact expected to be less severe than originally anticipated. The Invesco Wilderhill Clean Energy (PBW) holds a near-perfect fund score of 5.94, along with sharply positive score direction of 5.87. PBW moved back to a positive trend and recently completed a bullish catapult at $25.50. Similarly, the Invesco Solar ETF (TAN) also looks strong, with five consecutive buy signals and a move back to a positive trend in May. Both funds are actionable at current levels and appear significantly stronger than the broader energy sector.
The rising energy demand of AI and data centers has also provided a tailwind for utilities and energy as technology companies increasingly turn to nuclear and alternative power sources. The VanEck Uranium and Nuclear ETF (NLR) holds a strong fund score of 4.68, with a sharply positive score direction of 4.46. The fund is up around 85% from its lows in April, moving to a positive trend and recording four consecutive buy signals before pulling back in August. Despite the recent sell signal, the weight of the technical evidence is still overwhelmingly favorable for NLR.
ESG remains a hot-button issue in the world of investing, but many individuals still care about the type of companies in their portfolio. The strength of renewable energy could be an opportunity not only to deliver alpha but also to get exposure to environmentally responsible investments for ESG-focused clients. While the broader energy sector remains weak, the rebound in cleaner energy offers a potential opportunity to demonstrate added value.
