3 Energy Plays to Watch as the Sector Reacts to New Developments

The energy sector saw a sharp bid on Monday, Jan. 5, following developments tied to Venezuela’s oil industry and updated U.S. policy direction. Headlines over the weekend highlighted plans to re-engage U.S. companies in Venezuela’s energy infrastructure, which has suffered from years of sanctions and operational constraints. While the geopolitical implications will continue to evolve, the immediate market response was clear: energy stocks moved higher, and sector-wide momentum accelerated.

From a strictly fundamental and technical perspective, the energy sector is now shaping up as one of the more compelling areas of the market. Long-term charts show years of consolidation, improving relative strength, and renewed institutional interest. If momentum continues, recent developments may catalyze a breakout. Here are three ways investors can position for potential upside in energy.

Energy Select Sector SPDR Fund: Broad Exposure With a Bullish Setup

For investors seeking diversified exposure, the Energy Select Sector SPDR Fund (NYSEARCA: XLE) stands out. The ETF tracks the Energy Select Sector Index and provides broad-based exposure to large-cap U.S. energy companies across oil, gas, and energy equipment. Its top holdings include Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP), and Williams Companies (NYSE: WMB), which together account for more than half of the fund’s total weighting.

Beyond diversification, the technical picture is what makes XLE particularly interesting. The ETF has spent several years consolidating in a wide range between roughly $40 and $50, with $50 acting as a well-defined resistance level. Prolonged consolidation of this nature often precedes larger directional moves. If XLE can clear and hold above $50 in the coming weeks, it would mark a multi-year breakout and potentially signal a new leg higher for the broader energy sector.

XLE also offers a 3.11% dividend yield and a low expense ratio of 0.08%, making it an attractive option for investors seeking income and exposure without stock-specific risk.

Exxon Mobil: Sector Leader Near Breakout Levels

Exxon Mobil, the largest holding in XLE with a 23.7% weighting, is already showing leadership. Shares rose sharply on Monday and are now trading just below a major multi-year resistance level near $126. If the stock can break and hold above that level, it would represent a significant technical breakout and could act as a tailwind for the entire sector, given Exxon’s size and influence.

From a fundamentals standpoint, Exxon continues to offer stability and income, with a dividend yield of 3.3%. Analyst expectations are more measured, with consensus price targets implying modest upside, but the technical setup suggests sentiment could improve quickly if the breakout is confirmed.

Historically, Exxon has had exposure to Venezuela’s oil sector during prior periods of openness, positioning the company to participate in future activity if conditions allow.

Chevron: Best Positioned for Potential Production Upside

Chevron, the second-largest holding in XLE, may be the most directly positioned company should future Venezuelan production opportunities materialize. Analysts at JPMorgan have noted Chevron’s significant resource base in the country, and the company has maintained operations there in compliance with applicable laws and regulations.

Chevron shares surged more than 5% on Monday and are approaching the upper end of a multi-year consolidation range between roughly $140 and $160. Holding above $160 would be an essential development from a technical standpoint. A sustained move beyond that level could open the door to a larger breakout, with longer-term upside potential toward the $180 area.

Like Exxon, Chevron combines scale, dividend income, and improving momentum. If the broader sector continues to strengthen, CVX appears well-positioned to remain a leader.

Energy Sector Emerges From Years of Consolidation

Energy is emerging from years of consolidation with improving momentum, rising relative strength, and renewed investor interest. While recent news has drawn attention to the sector, the underlying technical structures suggest this move may be part of a larger trend rather than a short-lived reaction. For that trend to continue, key resistance levels across XLE, Exxon Mobil, and Chevron will need to be cleared and held. If they are, the energy sector could be entering a new and potentially durable phase of upside.

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