Our scans continue to detect a trend that has been creeping beneath the surface for months, with little to no attention.
At the index level, energy stocks have been dead money for the better part of five years — forgotten, ignored, and completely written off by most allocators.
But under the hood, the tape is turning for the entire sector. Consolidations are resolving, bases are completing, and leaders are kicking off the breakout with real momentum.
As with any broad-based uptrend, investors are already reaching out on the risk spectrum… bidding up the smallest and most speculative names.
Here’s the Small Cap Energy ETF $PSCE flashing a bullish reversal signal and breaking out above a key level of interest:
Momentum and relative strength are building on the breakout, supporting a new bull market for these oil & gas stocks.
And if Small Cap Energy is going to shift from a laggard to a leader, this is as logical a place as any for that to take place. Here’s the relative trend:
What excites me most about this theme is that it is home to some of the best-looking and longest-lasting continuation patterns in the market.
Before we talk about the ones we’re buying, here is our Small Cap Oil & Gas universe sorted by % off 52-week highs:
Small-cap E&P, services, and offshore plays — the high-beta corners of the complex— are now waking up and taking on a leadership role. This is risk-on behavior, and it’s bullish for the broader theme.
When small-cap energy trends, it doesn’t just drift. These are some of the most aggressive and persistent trends. And they can last for years.
We’ve been early to this theme, and already sold a double in our ConocoPhillips $COP calls for Breakout multiplier.
Right now, we have 8 small cap energy stocks steady to rip higher.
