Warning signs flash for US energy shares rally
XLE•US energy shares have climbed just over 42% this year, but technical analysis indicates the rally may be losing momentum. The S&P energy sector index fell 2.8% last month after reaching a record close of 1,006.74 on September 15.
1. Momentum shows strain
The S&P energy sector index remains on pace for its strongest annual gain since 2022, but its advance has shown signs of fatigue. Its nine-month Relative Strength Index reached its most overbought level since October 2007 in March, then failed to match the index’s later record highs in August and September.
2. Key levels to watch
The index gained for four consecutive sessions through Tuesday and was 3.1% below its all-time intraday high. A rebound above that peak could revive bullish sentiment, while a drop below the September 29 intraday low of 936.39 would increase expectations for further losses.
3. Oil chart signal
The RSI breakdown took shape as oil prices remained below their March highs. September’s candle for US oil prices was described as decidedly bearish, with the month’s open and close well below its extreme high.
