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There are Many Doubters and Non-Believers but the Energy Bull Continues to March Up

Contributed by Olaf Sztaba
NA-Marketletter Energy
www.na-marketletter.com
March 19, 2008


Our stand on the Energy sector has been firm: the energy bull is alive and well. Use any opportunity to increase your positions. In our last Energy Comment, we wrote, "We think the bears will continue to be disappointed, especially when more and more Energy stocks join the advance."

And disappointed they were! February was a superb month for Energy stocks. The strong upside action has silenced the bears and stunned many pundits. Continuing high energy prices - for oil, gas, and coal - has added fuel to already bullish fires.

On the sentiment side, the bullish setup is in tune with our bullish ears. The latest market jitters scared off investors to the point of capitulation and resignation. In the meantime, Energy stocks have quietly continued to march up. There have been few front-page headlines about the energy sector revival apart from the hysteria about the price of oil. The sentiment data shows that the bears still outnumber the bulls (lately we felt truly lonely!).

The Energy stocks index has showed the most stamina among all sectors during the last four weeks. The XOI index staged an impressive recovery and rallied toward the upper boundary of its one-year consolidation pattern. The uplift has eased some oversold conditions; however, it stopped short of sending a clear signal, for now. Such a stimulus would come from a decisive move above the index's 40-week (200-day) moving average. The improving market should cement this recovery and upgrade the technicals.

In the past we pointed out the selective nature of the Energy sector. The stocks that withstood the January sell-off, as predicted, performed the best. Among them, Arch Coal (ACI), Consol Energy (CNX), Natural Gas Services (NGS) or Encana (ECA) which were all added to our Energy BUY list. Recently, many other stocks joined the rally and improved their technical conditions (see our latest stock reports). This should help the entire sector to advance in a more unified fashion. For better results, we continue to keep our focus on the leaders. Watch for upcoming stock reports.

The fears of market collapse due to economic and banking troubles created many doubters who cannot comprehend the selective nature of this market. The energy bull should not have much trouble turning them into converts.

Use any dips to accumulate the strongest stocks.

XOI INDEX
(Weekly chart with the 40-week moving average)



The Energy stocks index has showed the most stamina among all sectors during the last four weeks. The XOI index staged an impressive recovery and rallied toward the upper boundary of its one-year consolidation pattern. The uplift has eased some oversold conditions; however, it stopped short of sending a clear signal, for now. Such a stimulus would come from a decisive move above the index's 40-week (200-day) moving average. The improving market should cement this recovery and upgrade the technicals.

March 19, 2008
Contributed by Olaf Sztaba
Email: osztaba@na-marketletter.com
Website: www.na-marketletter.com
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