What the charts say will happen next with oil and energy stocks, according to Katie Stockton

WTI crude oil futures have shown a confirmed weekly MACD 'buy' signal, indicating a significant upward shift in intermediate-term momentum, with potential for further gains in the coming weeks as weekly stochastic oscillators are not yet overbought; key resistance is noted near $77/bbl, and a break above this level could signal a reversal of the cyclical downtrend, while the VanEck Oil Services ETF (OIH) also shows improved momentum, suggesting likely outperformance in the short term and a potential breakout above $257, with a secondary objective of $298.

Analysis

Geopolitical tensions have catalyzed a spike in WTI crude oil prices, prompting a re-evaluation of market momentum. Technical indicators for generic WTI crude oil futures reveal a confirmed weekly MACD 'buy' signal, signifying a notable upward shift in intermediate-term momentum. Importantly, the weekly stochastic oscillator is not yet in overbought territory, suggesting the current rally could persist for several more weeks. Despite this positive momentum, the upmove is currently classified as counter-trend, with the primary trend remaining lower, evidenced by the falling weekly cloud model which presents key resistance near $77/bbl. A decisive breach of this $77/bbl level would be a critical indicator of a potential reversal in the cyclical downtrend, with secondary resistance identified at a Fibonacci retracement level near $84/bbl. Initial support is found near $65/bbl and the rising 50-day moving average. Concurrently, oil services stocks, represented by the VanEck Oil Services ETF (OIH), are poised for short-term outperformance relative to the broader equity market. OIH exhibits improved intermediate-term momentum and lacks signs of upside exhaustion, increasing the probability of a breakout above its Fibonacci retracement level near $257, targeting a secondary objective of $298. Clearing the 38.2% Fibonacci retracement level is a prerequisite for OIH to reverse its long-term downtrend. A long-term oversold condition in OIH could trigger a 'buy' signal by month-end if it maintains or surpasses current price levels, a development that would increase confidence in building long-term exposure to the oil services sector.

Key Decisions for Investors

• Investors should monitor WTI crude oil's ability to breach the key resistance at $77/bbl, as a sustained move above this level could confirm a reversal of the downtrend and warrant a more bullish stance on energy.
• Consider tactical long positions in WTI crude or related instruments, given the positive intermediate-term momentum signals, while remaining cognizant that the primary trend is still assessed as lower until key resistance levels are overcome.
• Evaluate short-term opportunities in oil services stocks, such as those within the OIH ETF, which are expected to outperform in the near term, particularly if OIH breaks above the $257 Fibonacci level.
• For longer-term allocations to oil services, await a potential month-end 'buy' signal from OIH's long-term oversold condition before significantly increasing exposure, as this would provide stronger confirmation of a sustained uptrend.