Nice 'N' Easy Does it for Energy Stocks

Much like the commodity complex at-large we have some energy stocks clearly making progress on the technical front in recent weeks and months while others are still searching for a clear bottom--Gold, silver, and natural gas have made clear strides in recent months, with gold being the ringleader in commodities, while other commodities like oil have experienced constant, sputtering, fits and starts.

Within the energy sector, we have three main ETFs: XLE for large cap integrated stocks, OIH for oil services stocks, and XOP for the speculative exploration stocks. Of course, that is merely a rough guide as there is overlap with stocks in a few of those ETFs. But you should get the general idea of what these ETFs cover. 

Hence, with the XLE (below on the monthly chart, basing tightly for years now) clearly outperforming OIH and XOP (XLE is above its 200-day m.a., for example) we can draw some inferences.

First and foremost, the big money is reticent to blast all-in long into any and all energy stocks: They are taking it nice and easy, just like the Sinatra song. This is actually expected behavior for a sector potentially putting in a multi-year bottom, as even the biggest buyers with the highest conviction still want to see their initial investment begin working in their favor before opening up their game and splashing in the more speculative names. 

Therefore, to see a name like Chevron, the epitome of an XLE integrated name, acting surging all throughout March is a promising sign. 

The next issue is whether some of the more speculative names begin to punish shorts who overstayed their welcome as well as longs who threw in the towel on the energy sector, overall. Quite a few institutional and retail players have become so dismayed at the constant letdowns in the energy complex that they simply cannot bring themselves to even touch these names at this point. And that is precisely why I am looking for the likes of RIG (a speculative OIH name with 18% of its float held short) to unleash a vicious squeeze sometime this spring. 

Overall, seeing the XLE out in front of the energy patch is a good first step in a long-term process of the sector finally turning back higher. Now we see if more speculative stocks ramp up and ignite a push higher in crude into summer driving season.