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One rare signal suggests there’s more to go.
Rare Signal Points to More Upside for Energy Stocks
If you want an edge as an investor, pay attention to unusual buying and selling in sectors. Often those footprints signal institutional appetite for equities.
While August has been painful for many stocks, with the S&P 500 (SPX) down -4.8% MTD, there’s a rotation happening under the surface of the market.
MAPsignals software is devoted to spotting unusual institutional buying and selling. Here’s a look at all stock buying in August as of 8/18/23.
By far, Energy has taken the lead with 22.1% of all inflows going to Energy stocks:
The buying is broad-based covering many well-known Oil & Gas names like Exxon Mobil Corp. (XOM) and Halliburton Co. (HAL).
But recently one huge spike in inflows jumped off the chart. Below plots all Energy stock buys and sells. On August 8th, 42 Energy names were bought according to our analysis.
To give you an idea of how rare that is, I’ve circled prior similar events:
The million dollar question is this: Does massive buying mean Energy stocks are heading higher? It actually does.
To test it I went back and studied all similar buying since 2013. There’ve been only 32 instances where 35% or more Energy stocks were scooped. That’s roughly 30% of our institutional universe.
Here’s how the forward returns shake out for XLE. A month later, the ETF slides 1.4%. After 6 months, XLE ramps 7.6%. Wait a year and the historical gains average a solid 15.8%:
Check it out:
Data is beautiful! If you’re thinking of fading the Energy rally, this rare signal suggests you may want to rethink it.
The Bottom Line & Explanatory Video
Energy stocks are flying high. Rare unusual buying in Oil and Gas stocks suggests there’s more upside to come.
A year after mega buying in Energy stocks, XLE jumps 15.8% on average.
Follow institutional footprints.
These insights are a truncated view of MAPsignals research which you can learn more here.
Disclosure: As of the time of this writing, the author holds no positions in XLE, XOM, or HAL.
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