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Is the Energy Sector Ready to Breakout?

The Energy sector has been moving higher on our potential breakout list, after this recent consolidation. XLE, at +27.84%, is the #2 performing S&P sector year-to-date. Over the last 6 months however, XLE is last, at -5.83%. Energy is a volatile sector and is still consolidating, but the potential reward vs risk on any upside breakout is favorable here.

The sector is starting to show some positive technical signals, with recent new highs in Continental Resources, (CLR), Enbridge, (ENB), Equinor, (ENQR) and Cheniere Energy, (LNG). The Energy ETF, XLE, has reclaimed the 50-day moving average as well as industry leaders EOG Resources, (EOG), Occidental Petroleum (OXY) and Schlumberger, (SLB), among others.

Our three favorite charts in the group here are Devon Energy, (DVN), Continental Resources, (CLR), and EOG Resources, (EOG). DVN is testing 90-highs and 3.6% below a breakout, CLR made a new 52-week high today and EOG is a recovery idea, reclaiming the 50-sma today.

This is a very volatile sector, so I always keep a trend following stop below, but we believe that the potential upside here, if there is any follow through, far outweighs the risk.

Disclosure: I am long Devon Energy, DVN.