Energy Stocks Losing Steam?

Earlier this year, energy stocks had some serious tailwinds behind them. Rising oil prices, stable earnings, and talks of a Fed pause helped push the sector higher. The Energy Select Sector SPDR Fund (XLE), which holds a mix of top oil and gas companies, caught a decent bid. For a while, it looked like it might keep going. But lately? That momentum has slowed. Prices are starting to fall, and a few technical signs are flashing yellow. So, is this just a mid-year pause, or are we seeing the early signs of something more? Let’s break it down.

What the Charts Are Telling Us

Price action first. XLE made a push toward the $89 mark back in July, but it didn’t quite stick. That level has acted like a ceiling more than once, and again, the ETF backed away. On the other side, there’s been a reliable support zone near $84 to $85. That’s the area where buyers have stepped in before, and it’s being tested again.

Right now, XLE is hovering near its 50-day moving average, somewhere around $85. That tells us momentum has stalled a bit. More concerning is the fact that it’s still sitting under the 200-day moving average. For long-term trend followers, that’s not where you want to see it.

XLE Daily Chart: Price Stalls Below Resistance, Momentum Cools

Source: TradingView. All indices are total return in US dollars. Past performance is not a reliable indicator of future performance. Data as of 6 August 2025.

XLE Daily Chart – Resistance near $89 holds firm, RSI cools from highs, and price slips under key moving averages.

Now let’s talk momentum. The RSI was pushing toward 70 a few weeks ago. That’s usually where people start to call a stock overbought. But it didn’t quite get there. It topped out just shy of that level and has since slid back into the 40s. A reading in the mid-40s isn’t bearish, but it does show that the heat has now faded.

There’s also a subtle shift worth noting; the RSI made a lower high even as price tried to tick upward. That kind of divergence can be an early sign that the rally is losing fuel.

The MACD, which tracks momentum based on moving averages, is hinting at the same thing. It’s been flattening (see chart below), and the histogram, those bars that show the gap between the MACD line and its signal, has been getting smaller. If the MACD crosses below its signal line, that would be another knock against the bulls.

Volume is adding to the picture. On rally days, the volume wasn’t all that convincing. But on some of the red days? There was a noticeable pick-up. That kind of volume behaviour often shows sellers getting more aggressive, while buyers take a step back.

Momentum or Just a Breather?

So where do we go from here? There are cases to be made both ways. On the bullish side, you’ve got stable oil prices, decent earnings from energy names, and the fact that XLE hasn’t broken support. RSI pulling back from high levels could just be a reset. And if price clears $89, it might open the door for another leg higher.

Momentum Signals Fading: MACD Nears Bearish Crossover

Source: TradingView. All indices are total return in US dollars. Past performance is not a reliable indicator of future performance. Data as of 6 August 2025.

XLE Momentum Signals – RSI slips back into the mid-40s, while MACD flattens and nears a bearish crossover.

But bears have plenty of ammo too. Momentum is clearly softening, we’re under the 200-day average, and volume hasn’t exactly been encouraging. If that $84 floor breaks, it could shift sentiment quickly.

What Traders Are Watching

There are two key zones. Resistance still sits near $88 to $89. If XLE can break above that, and do it on solid volume, it could mark a change in tone. On the flip side, support near $84 is under the microscope. A firm break below, especially with a bearish MACD cross or RSI slipping under 40, would make the bearish case a lot stronger.

Final Takeaway

This isn’t a full-blown breakdown. Not yet. But there are cracks in the foundation. Whether this is a pit stop, or a pivot point remains to be seen. Traders should stay alert, not alarmed. Because when momentum stalls, it pays to watch the road ahead a little more closely.