Our bullish call on oil and energy in 2017 was one of our best calls ever. It may also turn out to be our best call of 2018.
Over our two years of writing about oil and energy, there have been two themes that we’ve mentioned over and over again:
- Be patient.
- Consider investing in energy stocks rather than investing in oil itself.
Those themes remain just as important today. (I’m happy to say that our patience is now being rewarded.) Let’s take a look at where things stand today.
Oil is making highs not seen since 2015. It has been in the Green Zone since October 2016.
The long-term time-cycle for oil has been very accurate, and it is showing that a rising price is likely for another 2 years.
As we’ve pointed out many times, however, the Volatility Quotient (VQ) for oil is a lot higher than most people realize. The VQ for oil today is 30.7%. Oil has a higher VQ than both Netflix (28.7%) and Tesla (29.1%)!
Most investors are going to get burned if they try to invest in oil directly. That’s why we’ve repeatedly brought your attention to XLE, the popular Sector SPDR ETF of energy companies from the S&P 500.
The VQ on XLE currently sits at 17.5%. It’s more on par with stocks like Apple (16.9%) and Microsoft (16.6%).
The volume-at-price chart shows XLE broke through strong resistance in the mid to upper $60 range and has a clear path ahead.
The time-cycle forecast for XLE remains bullish. Though XLE and crude oil do not trade perfectly in sync, it’s very positive to see the forecasts for both moving higher at the same time.
XLE has moved up 25% since hitting its bottom in 2017. With oil continuing to move higher and the world’s economies continuing to improve, the move higher in XLE could have a long way to go.
We certainly think that energy has a bright future… at least through the middle of 2018.
Have a great weekend,
Richard Smith, PhD
CEO & Founder, TradeStops