Golden Cross Pattern Emerges In US Energy Stocks: Goldman Sachs Names 5 'Top Upstream Oil Picks'

U.S. energy stocks, as tracked by the Energy Select Sector SPDR Fund XLE, have recently formed what analysts term a “golden cross” as the 50-day moving average crossed above the 200-day moving average.

For U.S. energy stocks, this golden cross signifies the continuation of the existing uptrend, which commenced around mid-January 2024.

When the short-term moving average rises above the long-term moving average it suggests a strengthening of recent price action, potentially prompting investors to view this as a bullish signal for the trend’s extension.

The last occurrence of a golden cross in U.S. energy stocks was in late August 2023. Its impact was short-lived, as the XLE ETF began declining after mid-September.

Contrastingly, the golden cross formed in late December 2020 resulted in significant gains, with a 33% increase for the XLE ETF over the subsequent three months, a 45% surge over the following six months, and an astounding 130% appreciation over two years.

Currently, the energy stock gauge trades with a 9-percentage-point gap from the all-time highs achieved in June 2014.

Chart: US Energy Stocks Form Bullish Golden Cross Signal

The Analyst’s Take

Goldman Sachs analyst Neil Mehta has expressed a bullish outlook for oil prices, leading him to identify five “top Upstream oil picks.”

These selections include ConocoPhillips COP, Canadian Natural Resources Ltd. CNQ, Devon Energy Corp. DVN, Kosmon Energy Ltd. KOS, and Magnolia Oil & Gas Corp. MGY.

The analyst expects a 15% average return in a scenario with Brent prices trading at $80 a barrel.

According to Goldman Sachs’ price target, shares of Kosmos Energy are forecasted to have the highest potential upside of 26%.

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