Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Upside Trajectories For Both Oil And The XOP ETF

Published 01/18/2022, 01:26 AM
Updated 07/09/2023, 06:31 AM

It all started back on September 13, 2021, with a potentially bullish technical signal in our work on the SPDR® S&P Oil & Gas Exploration & Production ETF (NYSE:XOP). As I explained to our MPTader members at the time:

"I am not sure what the backstory is on this potentially very bullish technical setup (inflation, delivery problems, confrontation in the OPEC producing states, frigid winter in the US and Europe?), but one look at my attached Big Picture Chart suggests strongly that XOP has been under accumulation for nearly 2 years, 3 months, and has carved out a large inverse Head and Shoulders Bottom... From a nearer-term perspective, XOP today is trading above ALL of my near and intermediate-term MAs, which are clustered together in a relatively tight area beneath the price structure, 'threatening' to propel XOP to the upside towards a confrontation with multi-year resistance at 98 to 100... if taken out, will trigger MUCH HIGHER PROJECTIONS for XOP."

I added later that afternoon:

“Isn't it ironic that the Oil sector could be on the verge of a powerful upside acceleration when the global push for clean everything is being ratcheted up more than ever before? The fact of the matter is that it could take at least 10 years to shift away from fossil fuel, which leaves plenty of time for traditional energy prices to skyrocket both from a supply-demand perspective, and from an inflation-expectation perspective as well."

Since that mid-September technical alert, XOP rocketed from its then-price of 87.13 to a 2-1/2 year high at 112.85 on November 8, a vertical climb of nearly 30%, prior to a pullback to test support in the vicinity of the 200 DMA.

XOP dipped to as low as 88.02 low on December 21 prior to pivoting into a new vertical after holding above the 200 DMA on a closing basis. It has since climbed 26% to revisit its early November high at 112.85.

What's next for Oil and for XOP?

Both Oil and XOP exhibit very powerful near- and intermediate-term technical trajectories ahead of my next upside projections to $92-$96 and to 114-116, respectively. Will there be brief, possibly violent, pullbacks along the way? Probably.

However, fundamentally, the fact that oil demand is running ahead of supply, lack of excess capacity is deepening, oil discoveries are at multi-decade lows, and the green revolution is curtailing nuclear energy production amid an overarching hostile environment for shale production in the US and around the globe—all these factors are combining to form a particularly bullish background "story" for the energy sector during the weeks and months ahead that argue for much higher targets for both Crude and XOP beyond my next upside projections.

Daily XOP Chart

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.