We're seeing a huge move in crude oil prices after a drone strike in Saudi Arabia derailed global supply.
While the country expects to get production back up and running soon, the U.S. is taking measures as well. President Trump tweeted about being open to using strategic reserves, as well as trying to fast-track more pipeline permits.
The U.S. produces a ton of oil and many producers have been waiting for a spike in prices -- either due to higher demand or lower supply, the latter of which is happening now -- in order to increase production.
Despite the drone strike news being a well known event by midday, crude oil investors continue to buy the dip. Since Friday's close, crude prices are higher by 13.6%, currently trading at $63.34 per barrel.
Trading Energy Stocks
You can see a daily chart of the XLE above, while below is a weekly look.
One can clearly see the downtrend channel (blue lines) that had been in place for quite some time. You may also notice the gap-up strength on the daily chart above, sending the XLE well above its 200-day moving average. On the weekly chart, similar action propelled the stock over its 50-week moving average.
It's got investors looking for continued upside, particularly given the strength in crude oil.
Should crude oil continue higher in the coming days and weeks, it could ignite a big-time rally in what has been a very lackluster sector in 2019. From here, maintaining above $62.20 would be best for bulls.
In order to get a sense of how the XLE might perform, investors may want to keep an eye on some of its top holdings. Most notably, Exxon Mobil (XOM) - Get Report makes up roughly 23% of the XLE portfolio, while Chevron (CVX) - Get Report makes up ~22%.
ConocoPhillips (COP) - Get Report , Schlumberger (SLB) - Get Report and EOG Resources (EOG) - Get Report round out the top five, making up 5.77%, 4.4% and 4.21% of the portfolio, respectively. Investors may also keep an eye on the VanEck Vectors Oil Services ETF (OIH) - Get Report , which is up much more notably on Monday, climbing 8.8%.
For OIH (below), let's keep it simple. Over $13 is constructive for the bull case and keeps the 200-day moving average on the table. Below $12.90 is bad for bulls, putting it below a key level, as well as the 20-day and 50-day moving averages.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.