(Premium) January Energy Outlook

We downgraded the Energy sector shortly after publishing our December outlook. Bearish weekly momentum divergences on both the relative and absolute charts have us cautious about the future of the sector.

Remember, momentum divergences don’t always lead to trend reversal, so we’re ready to reinstate Energy’s overweight rating should prices resolve higher. For now, though, we’re taking a wait-and-see approach.

The absolute chart is also dealing with resistance from the 2014 highs. For those of you that have been around that long, 2014 was the year that oil prices began a huge, multi-year decline. That former peak has some memory.

One development in the sector that’s worth watching is the recent relative strength shown by the oil services industry. Hess is hanging above 15-year highs.

If they’re above 135, we can have a long-term target of 200.

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