The character of oil and energy stocks has completely changed in May.  After a rough start and a full blown liquidation of an energy trading firm, the stocks and oil have stabilized.  In fact oil has had a persistent bid.

One huge reason to be bearish oil early this year was the Commitment of Traders Data.  Since then, the extremes have significantly moderated.     Oil speculators have backed off the pedal in a big way after extreme bullishness to start the year.  At the same time Hedgers are closing out their shorts.

WTI_Crude Oil

XOP has formed a bullish divergence as it broke below and recovered this support area.

xop

Shale stocks like CLR are trying to find support at key levels.  You can see momentum stabilizing as well via RSI and MACD.

clr

Fracking Stocks like EMES have shown explosive moves off of lows.  In fact this just reached its highest RSI since February.

emes

Energy Majors like XOM and COP have been basing at support.

xom

cop

It’s worth noting the Dollar Index has recently broken down in a big way.  Perhaps that’s all that is going on here.  Then again, a further fall would obviously be a net positive for commodities.

usd

We’ll see if or how long it can continue, but this change of character has been the most notable development in energy price action in months.  If you’re a tactical asset allocator, this is a low risk opportunity with obvious exit areas to buy energy stocks while nobody is talking about them.

Trade ’em Well

For inquiries on premium research, you can reach me Aaron@NorthStarTA.com