Energy stocks led the market higher yesterday.
The S&P 500 gained 1.7% on Tuesday. Meanwhile, the Energy Select Sector SPDR Fund (XLE) – an exchange-traded fund composed of energy stocks – gained 3.5%. That’s over twice the return of the major indexes. And it trounced the performance of the banking sector – which seems to be just about everybody else’s favorite group right now.
Most important, though, is that yesterday’s energy stock rally looks like just the start of an intermediate-term move higher.
Take a look at this chart of XLE…
After the sharp decline in early February, XLE spent several weeks chopping back and forth in a tight trading range. That action allowed the 50-day moving average (MA)enough time to decline closer to the stock’s price.
That set up the potential for XLE to rally and break out above the