The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, was one of last year’s best-performing non-leveraged sector ETFs, but has struggled a bit to start 2017. That situation could soon abate as some well-known energy stocks are poised to rally again.

Notable is the fact that February marks the start of a multi-month stretch that is considered the seasonally strong period for the energy sector, the seventh-largest sector weight in the S&P 500. Rivals to XLE include the Vanguard Energy ETF (NYSEArca: VDE), iShares U.S. Energy ETF (NYSEArca: IYE) and the Fidelity MSCI Energy Index ETF (NYSEArca: FENY).

Last week, XLE “set a new low for its two-month slide but closed with a net gain on the day. Chart watchers call that a one-day reversal to the upside and it tells us that something happened that day to change the mood of the market. Volume, while admittedly not the powerful indicator it was before the age of ETFs, was elevated to suggest decent interest in the change,” reports Michael Kahn for Barron’s.

U.S. equities are on their way toward the ninth year of an extended bull market rally that has elevated valuations in many segments of markets. Nevertheless, exchange traded fund investors may still find some opportunities in some targeted sectors. Energy is one of a small amount of sectors that still trades at a noticeable discount relative to long-term averages. Still, some investors urge caution with the group.

The energy sector is just one of two S&P 500 sectors that currently trades at a noticeable discount to its long-term averages.

Additionally, the energy sector is usually among one of the largest sector weights in value ETFs, underscoring the point that the group is attractively valued relative to some defensive sectors, which trade at lofty multiples.

“The reversal is even more important because it happened at both short-term support from several weeks ago and long-term support going back to big turning points in 2014 and 2015. It also negated a breakdown below the trendline drawn from the start of the bull run one year ago. All that is left is a move above the short-term line drawn from this past December’s peak to give the bulls a high-confidence green light,” according to Barron’s.

For more information on the energy sector, visit our energy category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.