Although not many investors seem to know or care, energy stocks continue to trade incredibly well. Breakout energy stocks continue to push to multi-month highs, churning out gains. You wouldn’t know that with just a glance at the sector, though.
After rallying for three straight weeks and climbing 15% off the May low, the Energy Select Sector SPDR Fund (NYSEARCA:XLE) is now flat on the year. Further, the ETF is up about 8.5% over the last month.
Investors have to remember that the XLE ETF is dominated by two stocks in particular, Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX). Together, the duo makes up almost 40% of the weighting in the ETF. My point is: just because the XLE ETF is flat on the year, it’s important to remember that it’s dominated by two stocks and leaves a lot of energy stocks flying under the radar.
With that in mind, many breakout energy stocks have been outperforming the ETF. Let’s look at a few top names now.
Exxon Mobil (XOM)
As mentioned, Exxon Mobil (NYSE:XOM) is a dominant position in the XLE ETF. It’s the No. 1 position, commanding a near-21% weighting in the XLE. The stock has not traded as well as the following two stocks on this list, but it’s got some big positives.
First, the stock had a great July, closing right near the high of the month. Maybe expectations are a bit too high, but that could set up Exxon to rotate over the July high near $108.50. If it can do that, it opens the door up to the $112.50 to $114.50 area, followed by a potential push toward $120.
On the downside, the low-$100s have been pretty steady support. When looking at the monthly chart, investors can see how coiled the stock has been become.
Oil prices are on the move and energy stocks have been trading better. So if there’s a bid in this group, Exxon will likely catch a lift. On the plus side, the stock also pays out a 3.4% dividend yield.
EOG Resources (EOG)
EOG Resources (NYSE:EOG) is currently riding a five-week win streak, up more than 22% in that span. From the June low, EOG is up about 25%, while shares also pay a 2.5% dividend yield.
In fact, the rally has shares trading at their highest level since February. For now, it continues to ride its 10-day moving average higher, as the short-term trend has been incredibly bullish and investors continue to buy all the dips.
While earnings haven’t exactly been a catastrophe so far for energy stocks, it could be just what sidelined investors need to get back into the game in EOG. Remember though, earnings could also deliver an upside reaction. Should the stock correct, bulls should be ready.
If we get a dip into the low-$120s, EOG stock will find its 21-day, 200-day and 10-week moving averages, as well as the second-quarter high. A dip into this area that holds as support could be an excellent dip-buying opportunity, setting up the next leg higher.
Schlumberger (SLB)
Last but not least, we have Schlumberger (NYSE:SLB), a global technology company which has been no slouch of its own. From the low on June 1 to the high on July 31, the stock has roared higher by more than 36%.
The rally has helped drive its dividend yield down to 1.75%. While the payout is low, long-term bulls will gladly see the yield shrink if it means the stock is performing well. Down less than 2% from its all-time high, I’d say the stock is performing pretty well at this moment.
The stock enjoyed a five-day 16.9% rally in mid-July, which came on above-average volume. The rally came ahead of earnings, where the stock then dipped about 2% on the results and has since pushed to multi-month highs.
I don’t know that we’ll get a dip back to the 10-week moving average and the second-quarter high near $54, but if we do, active bulls should be on the watch for a buy-the-dip setup.
— Bret Kenwell
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Source: Investor Place