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Further Reading from MarketBeat
It's Time to Take Profits on These 2 Overbought Energy StocksAuthored by Dan Schmidt. Article Posted: 4/11/2026. 
Key Points
- Energy has been the top-performing sector so far in 2026, riding the oil price spike to a massive gain of over 25% after years of underperformance.
- But now that a potential ceasefire between the United States and Iran has been reached, the upside in energy stocks appears to be fully priced in.
- Broadly, energy investments are starting to get overbought, and for the following two stocks, it might be time to take profits.
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A fragile ceasefire appears to have been reached between the U.S. and Iran, pushing down oil prices and helping stocks gain more than 2% immediately after the announcement. That trend has persisted: the S&P 500 is up by more than 3% since ceasefire news broke on Tuesday, April 7. The development highlights the ever-changing nature of geopolitical conflicts, and it underscores the importance of taking profits on unexpected gains. Now that the energy sector looks overbought, it may be time to trim some of 2026’s early winners. Geopolitical and Technical Signals Indicate a Break in Energy's RallyEnergy has been the best-performing sector so far in 2026. The Energy Select Sector SPDR ETF (NYSEARCA: XLE) is up nearly 30% year-to-date (YTD), a move that would have had a much larger impact on the S&P 500 a few decades ago. With the explosive growth of the Magnificent Seven and other mega-cap names, the energy sector now accounts for less than 5% of the cap-weighted index, so this year's energy gains haven't been enough to lift the broader market.
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Now that a tenuous ceasefire is in place, the energy sector appears overbought and may lose some of the catalysts that propelled it earlier in 2026. Here are a few reasons investors might consider reducing exposure to the sector. The first challenge is a fading geopolitical risk premium. Even before the ceasefire, the energy rally was getting long in the tooth. Futures markets suggest investors expected oil to remain above $90 per barrel through December amid structurally higher fuel and petroleum prices. Much — though not all — of the extra profits accruing to the oil and gas industry are already priced in, and de-escalation, even amid other regional developments such as actions in the Strait of Hormuz, is a potential headwind. Another concern is potential demand destruction. West Texas Intermediate futures reached about $115 before settling at roughly $95 after the ceasefire announcement. While consumers prefer $95 oil to $115 oil, $95 is still a major increase from the under-$60 levels seen at the start of the year. Sustained prices around $100 would compress margins for airlines and other transportation companies, and price spikes typically take months to ripple through the broader economy. High oil prices won’t help energy stocks if they depress consumer demand. Finally, the sector is showing overbought technical signals. After the XLE reached an RSI reading near 80, it plunged below 50 in less than two weeks, signaling a sharp loss of bullish momentum. Some large-cap energy names remain above the 70 overbought threshold and may warrant consideration for trimming. If the price-shock component of the recent oil volatility is ending, that realization could trigger profit-taking in overbought energy names. Two companies that have climbed to all-time highs and now face clearer fundamental and technical headwinds are highlighted below. Suncor Energy: Share Buybacks Mask Declining RevenueSuncor Energy (NYSE: SU), Canada's largest integrated oil and gas company, has benefited from the crude price surge, but that rally has obscured some underlying issues. Suncor missed revenue expectations in its Q4 2025 earnings report, with revenue falling 3% year over year to $8.77 billion. The company has repurchased more than 12% of its float during its current buyback program, which may have helped support the share price ahead of the recent price shock. The next earnings report is scheduled for May 5.  Technical indicators add to the cautionary case. The daily chart shows a double-top pattern that often precedes a pullback. The RSI moved into Overbought territory in the second week of March but has since pulled back to its lowest level in months, and the Moving Average Convergence Divergence (MACD) displays a bearish crossover, confirming a momentum shift. Entergy: Bullish Catalysts Appear Fully Baked InEntergy (NYSE: ETR) has ridden the energy surge despite being a utility. But after roughly a 25% YTD gain, many of the company's catalysts are either not yet generating revenue or are already priced into the stock. Entergy has an agreement with Meta Platforms (NASDAQ: META) to supply power and infrastructure to a large Louisiana data center, but that deal has not materially boosted current earnings. In its Q4 2025 report, Entergy slightly missed both earnings per share and revenue estimates while reaffirming expectations for roughly 8% annual growth through 2029. An 8% compound annual growth rate is attractive for a utility, but ETR shares trade more like an energy stock, with a price-to-earnings ratio near 29 and a price-to-sales ratio above 4.  Technically, buying pressure appears to be easing after a large late-March surge, which could presage profit-taking. The RSI remains in the Overbought range, and the MACD shows widening between the MACD and signal lines — a sign of increasing volatility. If bullish momentum fades, investors may question why they own a utility trading at roughly 29 times forward earnings. |
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