“The catalyst for this breakout is without a doubt that failed breakdown early in the year. From false moves come really fast ones in the opposite direction. Throughout the second quarter, we’ve started to see that,” notes J.C. Parets of Eagle Bay Capital. “But when a pattern like this is completed, the resolution tends to create a trend that can last longer than most expect. I think there is still 20% upside here and that only gets us to the 2011 highs.”

The 2011 highs being referenced are XLE’s relative strength against the S&P 500. In terms of pure price action, XLE rose to a new all-time Thursday.

“I continue to like the energy space, but particularly on a relative basis. This is one of the more interesting developments we’ve seen throughout the second quarter, but I don’t see it getting many headlines. We like that,” added Parets.

Energy Select Sector SPDR