UPDATE 2-Battered energy sector could get reprieve from 'golden cross' chart signal

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By Alden Bentley
Dec 30 (Reuters) - Energy, Wall Street's worst performing
industry in 2020, could see its fortunes improve in the new year
after its price action surfaced a technical buy signal on the
charts on Wednesday.
The bullish development in S&P 500 energy sector .SPNY is
called a "golden cross," which is conventionally defined by
technical analysts as the 50-day moving price average rising
above the 200-day moving average. On Wednesday, the index closed
up 1.6%, its 50-day average rose to 266.26, eclipsing the
200-day average at 266.21.
It is up 5.1% in December. But it remains on track for its
biggest yearly collapse on record and is the worst performing of
the 11 S&P 500 industry sectors, owing to the global economic
contraction during the coronavirus pandemic that crushed demand
for oil, natural gas and fuels like gasoline.
Energy is down almost 37% year to date with one trading
session left in 2020. The best performing sector is Information
Technology .SPLRCT , up 42.3%. The benchmark S&P 500 .SPX
index is up 3% for December and 15.5% for the year.
"Golden crosses may be considered bullish technical patterns
in theory, but in practice, they don't always play out that
way," Paul Hickey at Bespoke Investment Group wrote in a note on
Wednesday.
Bespoke showed that of the 11 golden crosses for the energy
sector since 1990, one-week and one-month performances were
positive more than half the time after they occurred. However,
the performance was negative six of 11 times over three months
and six months.
Oil and oilfield services shares have been boosted by higher
oil and gas prices and re-kindling of oilfield activity. Crude
prices have more than doubled from spring lows, spurring
companies to bring back production that was shut earlier in the
year and complete wells that were not hooked up to pipelines.
A Dallas Fed survey of energy executives released this week
found 49% of them expected their companies to increase spending
on oil and gas exploration and production next year. An index of
activity in the bank's Texas, southern New Mexico and northern
Louisiana territory went positive this month for the first time
in a year.
“We are optimistic that we will have a weaning of excess oil
supply, and more importantly, suppliers of oil and gas, and that
will lead to a slightly higher sustainable price,” one energy
executive said. The same survey of 146 energy firm executives
found more than half expect publicly-traded, independent E&P
companies to decline to between 37 and 48 companies, from the
current about 60 firms.
The selloff in energy this year accelerated the erosion of
the industry's relative share of the overall stock market, which
has been in decline for a decade.

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