05Jan11:18 amEST

A Good Start to Their Winter Journey

After exuding clear and convincing relative strength yesterday, energy stocks are enjoying sharp rallies virtually across the board so far this morning. The three main energy sector ETFs, OIH XLE XOP, are all easily higher as I write this, with the oil services stocks in the OIH showing particularly promising strength. 

Obviously, this is an auspicious beginning to the new year. However, if you have been tracking our work both here and with Members we argued that energy stocks have been steadily improving since last spring, despite the sector staying out of favor in terms of sentiment for a good while now. 

Oil services leader like SLB is doing what leaders should do: Get out in front of the sector and show on trepidation regarding the bearish arguments against owning oil-related names going forward. 

Simply put, although the oil stocks are far from what may momentum and newcomer speculators would view as sexy, they are exhibiting very early signs of wanting to outperform this winter. I am also extrapolating their strength to related sectors, such as materials where we know the likes of CLF and FCX have been monsters the last few months. But do not forget steels, with X being a squeeze play flagging out nicely the last few weeks. 

As for OIH, the weekly chart, updated below, showing the oil services names trying to break through multi-quarter resistance. And if you zoom that chart out even more, you will see just how out of favor these names have been for years on end. 

In other words, the move may very well just be getting started and this could be the rare grand slam opportunity looking out the next 6-18 months for a sector which has become all too easy to kick while it has been down. 

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