As we approach year end and look forward to 2023, a top question on the minds of investors is whether the price of crude oil is signaling the end of the energy stock bull market.
Of primary concern within the investment community is the outperformance of energy stocks in relation to the price of oil. The Energy Select Sector SPDR® Fund (NYSE:XLE) has returned greater than 50% over the past twelve months compared to just 5% for the price of Brent crude oil and 0% for WTI oil.
Risk/Reward Rating: Positive
As Brent crude is a global price, I will use it as the benchmark for oil. The following 5-year weekly charts provide initial context for examining the outperformance of energy stocks in relation to crude oil. In the following oil chart, notice that the higher green line marks the current price and is the upper bound of what should be a strong technical support zone. The zone is bracketed by the green horizontal lines.
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