Shell at New Highs, Banks Coiling
Energy and Banks Are Loaded With Fuel for a Squeeze
Energy, Banks, and the Probability Bet
Energy has been one of the hardest trades of the past two years. Every breakout attempt faded. Every consolidation looked ready to rip — and then rolled over. Traders are frustrated, short interest is at record highs, and sentiment is as bad as it gets.
But here’s the thing: some of the best trades don’t come when everything is obvious. They come when no one wants them.
Wayne Gretzky said, “You miss 100% of the shots you don’t take.” Trading is the same. You can complain about how hard energy has been to trade, or you can recognize the setup building in front of us and take the probability bet.
And right now, the probability bet says energy — and its close cousin, regional banks — are gearing up to move.
📊 The Charts That Matter
Heating Oil – The Canary in the Coal Mine
Heating oil futures ($HO_F) are up 14% YTD, even while crude has been flat to negative. That divergence matters.
On the chart, you can see heating oil holding long-term support and grinding higher. Secondary energy products often lead the majors. In other words, heating oil tends to move before crude or broad energy equities.
So what’s the message? Demand is alive. This is the “ignored” chart that tells you the energy complex isn’t as dead as the consensus wants you to believe.
Energy – $XLE Pressing on New Highs
Energy ($XLE) has chewed up traders for months, chopping back and forth with no conviction. But the chart now shows it pressing against 100-day highs. That’s our line in the sand.
When $XLE breaks above resistance, it usually attracts flows that reinforce the move. And remember, commodities broadly are sitting in one of the tightest Bollinger Band squeezes in decades. Volatility is at historic lows. If this thing gets going, it won’t stop quickly.