The U.S. energy sector, as monitored through the Energy Select Sector SPDR Fund XLE, has recently witnessed the emergence of a “golden cross” as the 50-day moving average surpasses the 200-day moving average.

This golden cross signals a strengthening uptrend that originated around mid-January 2024 for U.S. energy stocks.

When the short-term moving average overtakes the long-term moving average, it indicates a bolstering of recent price movements, potentially encouraging investors to interpret this as a bullish indication for the trend’s continuation.

The last golden cross in U.S. energy stocks occurred in late August 2023. However, its impact was short-lived, with the XLE ETF declining after mid-September.

Conversely, the golden cross formed in late December 2020 led to substantial gains, with the XLE ETF surging 33% over the following three months, 45% in the subsequent six months, and an impressive 130% appreciation over two years.

At present, the energy stock index trades with a 9-percentage-point gap from its all-time highs established in June 2014.

Chart: US Energy Stocks Form Bullish Golden Cross Signal

Analyst Insights

Goldman Sachs analyst Neil Mehta has shared an optimistic perspective on oil prices, leading him to pinpoint five “top Upstream oil picks.”

These selections comprise of ConocoPhillips COP, Canadian Natural Resources Ltd. CNQ, Devon Energy Corp. DVN, Kosmon Energy Ltd. KOS, and Magnolia Oil & Gas Corp. MGY.

In a scenario where Brent prices hover around $80 per barrel, the analyst anticipates an average return of 15%.

As per Goldman Sachs’ price projections, Kosmos Energy is predicted to exhibit the most significant potential upside of 26%.

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