The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, is higher by nearly 4% over the past week, a move that has pushed XLE’s fourth-quarter gain over 9%. Some technical analysts are opining that XLE is on the cusp of an important technical breakout that could send shares of the benchmark energy ETF higher.
Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. The challenge for energy equities is that some oil market observers see more declines coming for crude. Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices.
“Energy stocks were broadly higher in Monday trading and have already seen a nice rally off their summer lows. If the XLE — a large energy-tracking exchange-traded fund — can break above its early November highs (just above $70), that’s going to change the minds of a lot of skeptics about the group and attract even more momentum into the group,” according to CNBC.
XLE has recently climbed above its 50- and 200-day moving averages. Although the ETF still sports a year-to-date loss of 7.5%, it is just 11% below its 52-week high.