These stocks can help you profit from a surge in the energy sector

While the overall market continues to grow and trade near all-time highs, one sector has quietly consolidated. The energy sector remains largely stable this year, despite the recent collapse experienced in the rest of the market.

As you probably know, the energy sector and its many publicly traded companies can endure periods of calm and extreme volatility. It is mainly in the hands of oil prices, geopolitical tensions and OPEC. So perhaps it’s a surprise that, with the war in Ukraine and the Middle East, the Energy Select SPDR Fund New York Stock Exchange: XLE it is almost stable over the year and is trading in the middle of its 52-week range.

However, as the range narrows further and the potential for geopolitically disruptive developments increases, this sector ETF could be close to turning in either direction.

Therefore, now might be a good time to familiarize yourself with the ETF, the critical levels on the chart, and its key industry players.

The energy sector ETF

The SPDR Energy Select Sector fund New York Stock Exchange: XLE is an ETF that seeks to provide investment results that generally correspond to the price and yield performance of the Energy Select Sector Index (the Index). The index includes companies from the following sectors: oil, gas and consumer fuels, as well as energy equipment and services.

The ETF has a dividend yield of 3.87%, a net expense ratio of 0.10%, and a market capitalization of $34.64 billion.

The sector ETF is trading in a narrow channel right at two key simple moving averages (SMAs), the 200-day and 50-day SMA. Multi-month consolidation, declining volume, range and converging SMAs signal that a breakout in either direction is likely to occur in the following weeks or months.

The key level to pay attention to as the chart develops further and time passes is the critical $80 support zone, which serves as a potential breakdown level. Conversely, the range between $90 and $93 will serve as significant resistance, a potential dip level, and an upside breakout zone.

Three industry players to keep an eye on

Exxon Mobile NYSE:XOM

With a market capitalization of more than $400 billion, Exxon Mobil is one of the largest oil companies in the world. XOM is the largest holding in the ETF industry, with a weighting of 21.11%, and as such, makes it a key player in the industry and one that holds directional influence. XOM currently has a P/E of 11.45 and an RSI of 50.28, indicating that it may be in value territory. The oil giant has a Moderate Buy rating and a price target of more than 25% upside.

Chevron New York Stock Exchange: CVX

Chevron is the second largest holding in the XLE ETF, with a weight of 18.52%. The stock features strong dividend growth and an attractive dividend yield of 4.02%. CVX currently has a P/E of 13.23 and an RSI of 52.67, indicating that the stock may be in value territory.

A move above the short-term resistance at $155, which would also serve to reclaim the 200-day SMA, could serve as confirmation and signal a change in momentum.

Schlumberger New York Stock Exchange: SLB

SLB is the third largest holding in the XLE ETF, with a current weighting of 5.38%. The stock has a dividend yield of 2.12% and a P/E of 16.18.

SLB shares have underperformed the broader sector in recent months, with the stock dropping nearly 13% over the previous three months. Notably, shares are now trading near a higher critical support level, the stock’s uptrend, near the current price. If stocks start to fall, there could be a significant shift in momentum. Instead, analysts see substantial upside for the stock, with the consensus price target calling for an upside of nearly 50%.

Before you consider Chevron, you’ll want to hear this.

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