U.S. energy stocks, as tracked by the Energy Select Sector SPDR Fund (NYSE: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 (NYSE:COP), Canadian Natural Resources Ltd. (NYSE:CNQ), Devon Energy Corp. (NYSE:DVN), Kosmon Energy Ltd. (NYSE:KOS), and Magnolia Oil & Gas Corp. (NYSE: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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