Late last week, Israel launched an aggressive and overwhelming round of attacks on Iran. The stated goal? To prevent Iran from progressing further toward developing a nuclear weapon.

Naturally, I hope for a negotiated, peaceful end to this conflict – and I’m sure you do, too. But markets will keep trading anyway as the conflict unfolds. Given the surge in oil prices that followed the strikes, it’s only logical for traders to ask: “What’s next for energy stocks?”

Check out this MoneyShow Chart of the Day. It shows the performance of the Energy Select Sector SPDR Fund (XLE) over the past 12 months.

Data by YCharts

You can see that over the longer term, there hasn’t been much performance to speak of. The energy conglomerates that dominate XLE – like Exxon Mobil Corp. (XOM) and ConocoPhilips (COP) – haven’t gained much...or lost value...in the past year. The same goes for energy services firms like Schlumberger Ltd. (SLB) and refiners like Valero Energy Corp. (VLO) that are in XLE.

But the XLE DID experience a high-volume washout in April during the tariff-driven turmoil. It made a series of higher lows since then, even before the Israeli strikes. Then it attempted a high-volume break above gap resistance – and the 200-day moving average – on Friday.

I don’t know how this latest Middle East conflict will unfold. But if I didn’t see the news at all – and just looked at this chart – I’d say we could have a serious trend reversal underway. I’d watch for a couple days to see if the breakout holds. And if so, I’d be ready to buy.

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