Beginners Series Webinar: Join us on Monday, February 9th at 2 PM (ET) for our NDW Beginners Series Webinar. This week's topic is: Idea Generation with Stocks and Funds Register Here

The new year opened with several of the largest indices extending the strong performance trends seen in recent years. Yet as market leadership rotated away from growth-driven areas toward more defensive segments, many of the prior “risk-on” leaders have lost some momentum. This shift is evident in domestic equities dropping to second place within our DALI asset class rankings and the technology sector transitioning into equal-weight territory in our sector rankings. In contrast, one defensive area showing meaningful improvement early in 2026 has been dividend‑oriented equities.

For context, dividend-paying stocks are generally characterized as mature companies, with a consistent history of proven earnings ability and strong cash flows. On a factor-basis, these typically fall under “low-volatility” and “value-oriented” factors, given the nature of their business. The Asset Class Group Scores (ACGS) page offers a great tool to gauge the performance of several groups, along with a historical time-series of how that group has performed over time. On the ACGS page, the “Dividend Stock” has been on quite the run in recent months. The group currently maintains an average score of 4.27, placing it above the 75th percentile in terms of ranking on that page. As shown in the image below, the dividend stock group crossed above 4.0 for the second time since 2011 (when the group was added on the ACGS page). Since crossing above 4.0, the group’s average score has continued to climb higher, as it now maintains readings in all-time high territory.

There are several approaches that can be used to gain exposure into dividend-paying areas. One approach includes using the NDW Yield Portfolio (SPX500YLD) model found in our “Model Lists” page. The portfolio is created by using the highest dividend yielding stocks in the S&P 500 and utilizes our NDW relative strength matrix methodology. As per the rules, the model buys stocks that:

1. Are in the top 10 of the matrix
2. Maintain a technical attribute score of at least a 3 (>=3)
3. Currently trade on a PnF buy signal

For a position to be sold, the stock must

1. Fall to the 21st position or below in the matrix
2. Fall below a technical attribute score of 3
3. Or trade on two consecutives sell signals

Year-to-date, the model has outperformed the S&P 500 (SPX) benchmark by over 8%. Additionally, when looking at the 5-year performance, the model has outperformed by north of 1.5% year-over-year. As a nuance, this performance figure does not include the “total return” of the model. Which, if accounted for, would yield a higher performance figure by several hundred basis points (current yield on model= 3.88%). Altogether, this makes the model a practical tool for investors seeking to incorporate high-yield equities into their asset-allocation strategy.

For those who are more interested in simply using an ETF to gain exposure, you could consider using the Schwab US Dividend Equity ETF (SCHD), which provides exposure to high-yielding U.S. dividend-paying stocks with a minimum of 10 consecutive years of dividend payments. The fund reversed back to a buy signal after completing a double top break at $28.50 last month. SCHD maintains a technically acceptable fund score of 3.54 with a notable score direction of 1.70, highlighting its improvement in recent months. Year-to-date (YTD), the fund is up over 15% and ~5.9% in February alone. Additionally, the fund offers an impressive yield of 3.5%. The weekly OBOS indicates that the fund is in overbought territory, so wait for the 10-week trading band to normalize before considering. Initial support is at $26.50, with additional support at $24 dating back to mid-2025.

This week’s action has seen continued upside and near-term leadership out of energy funds and stocks.  A little over a week ago, the sector moved to the third position within the NDW DALI Sector Rankings, and this week’s action has brought energy within one signal of basic materials in second. The broader State Street Energy Select Sector SPDR Fund (XLE) continues to trade near last week’s all-time chart highs, while the Invesco S&P Equal Weight Energy ETF (RSPG) improved on recent highs during Thursday’s trading (2/19), rallying above $99.

Under the hood of the broader energy sector, the iShares U.S. Oil & Gas Exploration ETF (IEO) and iShares U.S. Oil Equipment & Services (IEZ) has shown notable technical improvement with both rallying to multi-year highs. Thursday’s (2/19) action brought the trend chart of IEO within a couple boxes of its all-time chart high at $112, and the market RS chart returned to a buy signal after having been on an RS sell signal since February 2023. IEO now joins IEZ with a fund score above 5 (out of 6) with IEZ having maintained a market RS buy signal and score above 5 since mid-January. Both ETFs are trading in overbought territory with weekly OBOS readings north of 100%, so those seeking long energy exposure are best to look for a pullback from recent highs down to prior resistance levels before considering. IEO is actionable at $102, while IEZ is action in the $25 range.

Most energy-related ETFs show extended and/or overbought positions on their point and figure trend charts. Energy stocks present a variety of different chart characteristics, but two provide notable examples of the rally witnessed within most.

Like energy funds, Exxon Mobil Corporation (XOM) rallied notably to kick off 2026. After giving a second buy signal in November last year, XOM cleared resistance in the $120s in January before improving to an all-time high in February at $156. Thursday’s action brought the trend chart back into a column of Xs after briefly pulling back last week, indicating price consolidation has begun. With the stock maintaining a 4 technical attribute rating and ranking within the top quintile of the oil sector matrix, XOM is likely one within or potentially being considered for client portfolios. While we look for chart and price consolidation, a normalization of the 10-week trading band is also needed before adding new or additional exposure.

BP has rallied along within the broader sector, giving a second buy signal in January as it has rallied to $39. Unlike Exxon though, BP didn’t rally to new highs and has notable resistance in the $40 to $41 range. BP maintains a 4 technical attribute rating due to superior market RS and a positive trend and ranks within the top half of the oil sector matrix while yielding north of 5%. While short-term holders may look to lock in a profit with the rally, resistance in play likely warrants patience for long-term holders. A move above resistance signals potential for further upside and would develop long-term support.

Stocks with similar chart action to XOM and BP could have similar approaches, but should there be any questions, feel free to reach out to the analyst team.

Though it may seem there is a lack of actionable energy ideas, they’re out there. Two potential options are Teck Resources (TECK) and Valero Energy (VLO), both of which rank within the top half of the oil services sector matrix. TECK has been a 5 for 5’er since seeing its peer RS chart give an RS buy signal in the latter part of January, while VLO has maintained a 4 TA rating since July last year. TECK has consolidated during February’s trading and is currently actionable in the mid $50 to $60 range, while VLO broke out of a brief consolidation to kick off February and is actionable at current prices.

To cull out other potential ideas within the energy sector, NDW users can utilize the screener tool to search for 4 and 5 technical attribute names that maintain a positive long-term trend and reside within actionable territory (Weekly OBOS ~ 70% or less) on their 10-week trading band.

Featured Charts:

Portfolio View - Major Market ETFs

Daily Option Ideas for February 20, 2026