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While energy stocks will likely struggle to match last year’s blowout performance, a recent crude bounce may be setting the wheels in motion for the sector to regain a leadership spot, say some strategists.
“WTI (West Texas Intermediate) put in consecutive closes above $83, including a weekly close, for the first time since last November,” said Jonathan Krinsky, chief market technician at BTIG, in a note to clients on Monday. Those back-to-back closes left the commodity at $85.50 a barrel on Friday, its highest level of 2023.
Oil prices
CL.1,
rose for a third straight month in August, thanks to tighter supplies that outweighed worries over weak China and overall energy demand. A so-called golden cross pattern also has some technicians optimistic about a move higher for the commodity.
Krinsky said oil, whose move was impressive in face of a stronger dollar, now looks headed to $90-$93 a barrel. And “energy equities are resuming their relative leadership,” he added, offering the following chart:
With a year-to-date percentage gain of 2.8%, the S&P 500 energy sector
XX:SP500.1010,
which includes heavyweights such as Chevron
CVX,
and Exxon Mobil
XOM,
is about the sixth-best performing sector, though well behind the 44% return seen for information technology. Down 11.8%, utilities are the worst performers, according to Yardeni Research, which provided the following chart to clients:
Yardeni Research/Standard & Poor’s
One downside to crude’s climb is the pressure it will put on consumers, noted Krinsky. Sports retailer Big Five Sporting Goods
BGFV,
restaurant chain Cracker Barrel
CBRL,
Applebee’s owner Dine Brands
DIN,
and theme park group SeaWorld Entertainment
SEAS,
are all part of his “vulnerable consumer charts group.” Here’s a look at two of those stocks:
BTIG/Bloomberg
Charts of Big Five and Cracker Barrel pointing to possible downside ahead.
Two retail stocks headed in the other direction are athleisure wear maker Lululemon Athletica
LULU,
and discount chain Ross Stores
ROST,
said Krinsky, offering the below charts:
BTIG/Bloomberg
Read: 10 growth stocks that are trading at bargain prices, including Delta and Cheniere Energy
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