This Energy ETF Is on Wall Street's "Buy" List. But Have They Already Missed the Boat?
The best time to get on board this bullish trend was back in November, before prices doubled!
by Nico Isaac
Updated: July 14, 2021
These days, it's easy to get sucked into the media vortex swirling around cartoon memes turned billion-dollar cryptocurrencies, or tech giants shooting themselves into outer space. So much so that you may not realize that the best-performing financial sector of the first half of 2021 was...
...the oil industry! And its related energy exchange traded funds. (Chart provided by Fact Sheet)
One such oil fund -- in fact, the oldest and largest of the bunch -- the S&P's Energy Select Sector SPDR Index XLE has risen to become one of Wall Street's hottest summer picks:
- "Stocks This Week: Buy Energy Sector SPDR Fund" (July 11 Forbes)
- "Oil, Energy Sector Gain on Improving Fundamentals" (July 8 Nasdaq.com)
- "Can Energy Stocks & ETFs Continue Their Hot Streak?" (June 17 Yahoo! Finance)
In the words of a July 7 Forbes:
"Energy Was the Top Performing Sector in the First Half of 2021... The rocky times of 2020 are well behind the energy sector at this point. Last year there were many premature obituaries written for the energy sector, but it has certainly shown plenty of life in 2021."
Indeed, one of those premature obituaries was for XLE. Last October and November, the oil supply crisis caused by the pandemic was slated to bury all energy-related assets six feet underground. Said an October 30 Barron's:
"Energy is the worst sector, ever."
Added the November 2 CNBC:
"Energy stocks aren't worth holding as they sink deeper into the red... There's no clear indication of a trend change anywhere close to happening with this particular index."
And yet, an upside trend change is exactly what happened.
As it's often the case, Elliott wave price patterns showed them beforehand. Our November 9, 2020, Energy Pro Service showed this chart of XLE that anticipated a bullish change of trend.
"With five distinct legs from the 46.88 swing peak through the 26.98 low, a bottom of some magnitude appears to be in place...
"If this is the operable wave count, the XLE should trend on up in an impulsive manner."
From there, XLE began to rally, reaching the $40 level by November 24th. The fund's moves were up-down-up into February, at which point our analysis saw the upside path clear for takeoff.
Our February 10, 2021, Energy Pro Service showed a third wave rally unfolding -- the strongest and fastest of all Elliott waves -- and said: "The XLE should ratchet on up from the 38.94 swing low in an impulsive manner. Any backing and filling should prove corrective and set the stage for further advance."
And this last chart captures the bullish change of trend that persisted as XLE continued its impulsive rally to a 16-month high in July.
While no Elliott wave forecast is ever perfect, what's undeniable is that the waves allow you to actually forecast the trend instead focusing what's already behind.
Our Energy Pro Service is just a click away.
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