In line with Oppenheimer analysts, power values haven’t flashed this declining sign since 1931
Energy stocks had a bad year, by far the worst of the S&P 500 sector, and the damage could be worse beneath the surface.
According to Oppenheimer, head of technical analysis, Ari Wald, the sector has been at its lowest level since 1931 compared to the S&P 500.
"The sector has been really in trouble not just last year but for the past five years as well. And there are a few things against this sector that we think are too early to really turn this around," Wald told CNBCs "Trading Nation" on Monday.
For example, over the past 20 years, the S&P 500 has risen more than 130% while the XLE Energy ETF has fallen 3%.
"The trend is still bearish whether you look at it against yourself or against the market. Point two, I think the broad internal weakness is a negative that is still weighing on the group. Point three, I think you." have the risk And point four, you are facing headwinds from the poor seasonal conditions that the sector is also facing. Typically November through January the sector was the worst performing of the 10, now 11, S&P sectors since 1990, "said Forest.
However, he does endorse a few stocks related to energy – he highlights First Solar and NextEra Energy as two tips in the renewable energy space.
Chad Morganlander, portfolio manager at Washington Crossing Advisors, also urges caution in the energy sector.
"You have to be extremely nimble," said Morganlander in the same "Trading Nation" segment. "We are currently underweight the energy sector. We believe that we would be a little more careful about investing in energy over the next three months."
Morganlander, however, was more optimistic over the longer term.
"If you look over the next 18 to 24 months, we think energy should be part of a well-diversified portfolio. Hopefully with Covid moving into 2021-2022, you could see better growth momentum, better realignment between supply and demand In terms of oil, this could potentially drive oil prices up and the entire sector up as well, "Morganlander said.
Disclaimer of liability