By Doug Busch
Crude oil has rallied sharply in recent sessions with United States Brent Oil Fund jumping almost 25% for the week amid escalating Middle East tensions, as investors position for potential supply disruptions. From a technical perspective, stocks in this sector appear likely for a prudent pause in the very least and a likely tactical pullback.
Strength in the energy sector was evident well before the recent escalations in the Middle East. The State Street Energy Select Sector SPDR ETF is the best performing of 11 S&P groups across three-month, six-month, one-year, and year to date lookback periods. The XLE is heavily weighted at the top, with the two largest holdings making up over 40% of the ETF. However, if we look at the more "equal weighted" State Street SPDR S&P Oil and Gas Exploration ETF, we can see some signs of exhaustion.
That XOP ETF is up over 36% over the last year. Demonstrating its consistency, it not fallen in consecutive sessions for two months. XOP is on a seven-week winning streak and was up almost 7% heading into today's trading.
Looking at its daily chart, however, this week has seen some dubious candlesticks that hint at fatigue. On Monday, there was a bearish hanging man; on Tuesday, an engulfing candle appeared; and Thursday registered a shooting star. Note that the prior four shooting stars dating back to last March all started a quick drop in the ETF's price.
I think XOP could potentially pull back toward the $145 area from its current $166 level, which would see the price catch up to a rising 50-day simple moving average before the uptrend resumes. That would be a 14% haircut from current prices.
Among individual names, one of the mega caps, Exxon Mobil, looks vulnerable. It is looking at a potential third loss in the last four weeks, starting with a doji candle the week ending Feb. 13. This week so far XOM is trading 6% below its intraweek highs.
Looking at the daily chart, one must credit the volume that has backed up the recent price surge since 2026 began. But note the bearish RSI divergence, where the RSI made a lower high as price made a higher high. This signals weakening momentum. Couple that with the fact that a breakout above a bull flag is faltering quickly, as we know the best breakouts tend to work right away. This is now in jeopardy of losing its 21 day exponential moving average and I think a move toward $140 is in the cards in the near term, which would be a 9% drop from current prices.
Marathon Petroleum, an oil and gas refiner, is up 58% over the last year. The concern is that a double top could be forming in the $220 area on the weekly chart dating back to April 2024.
Looking at the daily chart the caution here is the bearish dark cloud cover candle from Thursday at all time highs. Like many energy related equities, this is showing bearish RSI divergence. Notice how round number theory came into play at the very round $200 number in the fourth quarter last year. The last two times the RSI traded above the overbought 70 level, the price pulled back. It's there again. Look for this name to travel back toward $200 in the near term, which would equate to a fall of 10% from current prices. Remain bearish below $235.
Marathon Petroleum was trading around $218 Friday.
Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.
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(END) Dow Jones Newswires
March 06, 2026 11:40 ET (16:40 GMT)
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