The Energy Squeeze Isn’t Done Yet — Oil Is Setting Up
King XLE
In mid-December, we flagged the enormous squeeze risk in energy: “XLE continues trading inside the huge range that has been in place for years… when things eventually break out, vacuums are created.”
XLE has surged and continues printing new recent highs as of writing.
RSI is overbought, but the ETF has traded in overbought territory for weeks. As we all know, overbought conditions can persist far longer than most expect.
Source: LSEG Workspace
Not oil, but oil matters
XLE ain't oil, but it loves when oil squeezes.
Source: LSEG Workspace
Imagine...
...oil breaks above the downtrend line. A light golden cross is now in place, the 50-day crossing above the 100-day. That would materially change the technical setup.
Source: LSEG Workspace
Shorts carried out on stretchers
As we pointed out Monday: Last week’s % short covering in US Energy stocks was the largest since Oct ’22 — and the second largest in the past five years (GS PB).
There are likely still shorts to squeeze, especially if oil confirms higher.
