Volatility has compressed to multi-year lows on the monthly Strazza Indicator, while momentum continues to improve. That combination tends to precede fast, aggressive moves.
When volatility contracts this much, it rarely stays quiet for long.
That’s exactly what we’re seeing in the Energy Sector ETF $XLE.
Price is coiled near major historical levels. Buyers continue to absorb overhead supply. And every test of the range increases the odds that the eventual breakout is both decisive and powerful.
Above 50, energy is ready to roar and we have to lean in hard.
When we look at the two largest oil and gas companies in the world — Exxon Mobil $XOM and Chevron $CVX — the story is very similar.
Exxon has spent the last three years digesting gains above former highs, now pressing against its highest level ever while volatility sits near multi-year lows.
All the pieces are in place for a major breakout.
Chevron $CVX tells a similar story, but in a different way. It’s trapped in a massive multi-year coil, pinned by converging VWAPs.
The longer this builds, the more fuel there is for the eventual move.
If these two leaders break out, it’s hard to see how the rest of the energy complex doesn’t follow.
Energy is shaping up as a major rotation — 2026 may be when it finally pays off.
I’ve been increasing exposure — picking up calls in $XOM, $SLB, $COP, and last Friday we bought some $CVX calls for Breakout Multiplier.
We’re likely to be able to sell the double this morning…
