Breaking News
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. More details

The Energy Sector Moves From Worst To First

By Michael KramerStock MarketsJan 15, 2021 06:11
The Energy Sector Moves From Worst To First
By Michael Kramer   |  Jan 15, 2021 06:11
Saved. See Saved Items.
This article has already been saved in your Saved Items

This article was written exclusively for

Energy stocks have surged in 2021, with the Energy Select Sector SPDR ETF (NYSE:XLE) the best performing sector, up nearly 18% to start the year. The group may still have room to climb based on some bullish options betting, suggesting the ETF rises to as high as $48.50, a jump of nearly 9%. 

The strong start to 2021 for the sector is due to a slumping US dollar, which has helped to support oil prices, sending the commodity to more than $53 after starting the year below $50. But it isn't just improving oil prices helping; sentiment among the group has improved, with sell-side analysts like JP Morgan upgrading Exxon Mobil (NYSE:XOM).

Bullish Betting Taking Place

There has been plenty of bullish betting taking place on the XLE ETF at the $45 strike price for expiration on Feb. 19. Over the past 5 trading sessions, the open interest for those calls rose by around 52,000 contracts over that time. The data shows that most of the calls were bought for approximately $1.05 per contract. It would suggest that the ETF is trading over $46.05 by the expiration date. 

Open Positions
Open Positions

Additionally, there has been some bullish betting on the XLE at the $48 strike price for the same expiration date. In this case, the calls were bought for about $0.45 per contract, suggesting the ETF is trading above $48.45 by the middle of February. That would be an increase of almost 9% over the next few weeks.

Big Exxon Upgrade

The bullish outlook has been aided by the big moves higher by stocks like Exxon Mobil, which has surged off its lows of $31.50 back in October. The stock got an added boost recently when JPMorgan (NYSE:JPM) upgraded the stock to overweight for the first time in seven years, while giving the equity a price target of $56, which would amount to a gain of around 11%. 

The bullish optimism is undoubtedly also reflected in Exxon's technical chart, which currently shows a cup-and-handle pattern. This pattern would suggest further upside to the stock from its current levels of around $50. A projection of the bullish technical pattern would indicate that the stock climbs to approximately $54.75, a gain of nearly 9%. That happens to also be where a technical level resides from a previous peak on June 8. 

Exxon Mobil Daily
Exxon Mobil Daily

Improving Economy

The bullish outlook has been driven by improving oil prices as the dollar has plunged, and as the global economy begins to recover. The outlook for the economy has been aided by the prospect of more fiscal stimulus from the US. That has resulted in yields, including the 10-year note, rising while pushing the dollar lower. The falling dollar has sent the oil prices surging their highest level since February of 2020. 

If the dollar remains weak and global demand for oil continues to recover. It certainly seems possible that the energy sector can continue to see a significant tailwind in 2021. After all, the energy group had a horrible 2020, despite many investors focusing their attention on the world of renewable energy. The business of fossil fuels isn't likely to disappear anytime soon, and that means the sector could continue to push higher in 2021, as it recovers from its horrible 2020 losses. 

The Energy Sector Moves From Worst To First

Related Articles

The Energy Sector Moves From Worst To First

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email