## Session overview Energy stocks dominated the after-midnight gainers as the Iran war and Jones Act waiver extension lifted oil majors COP, CVX, and XOM by more than four percent each. Semiconductor and AI-exposed names took the other side, with INTC sli

Verdict

This contrarian short strategy on energy majors is neither historically profitable nor currently actionable, making it easy to pass on. The single strongest point in favor is that the fundamental setup is real — per the CNBC and Reuters coverage, the Iran conflict and Jones Act waiver extension genuinely lifted COP, CVX, and XOM by more than 4% each, pushing USO's daily RSI to 84.3, which is the exact type of geopolitical momentum a contrarian fade wants to short. But the evidence against this specific trade is overwhelming: the backtest on COP over 60 months returned -7.0% with a brutal 30.8% win rate across 39 trades, the parameter sensitivity analysis failed to identify any robust setup within its time budget, and USO's RSI sits 19 points above the 65 ceiling the strategy needs before it can even trigger. The fundamentals themselves are mixed — COP's EPS fell 18.7% year-over-year despite the commodity tailwind, and Trump's "making too much money" comment raises windfall-tax risk — but these do not rescue a rule set that has bled in both windows tested. **Conviction breakdown:** Backtest evidence is weak (30.8% win rate, negative return). Thesis support is moderate (the geopolitical catalyst is genuine). Trade readiness is very low (RSI far from trigger). Risk quality is modest (9.4% max drawdown is bounded but daily-bar exits understate intrabar risk). Fundamentals trend is neutral (strong revenue but declining EPS for energy majors).

Trade now

This is a contrarian momentum-fade short on the energy majors — COP, CVX, XOM, SLB, and USO itself — that fires when the oil ETF (USO) signals overextension on the daily. All entry conditions are evaluated on USO daily bars and then applied as shorts across the five trade symbols. Right now, USO's RSI (14) is 84.3 — deeply overbought — and the strategy needs RSI at or below 65 before it will trigger. That gap of roughly 19 points is the single biggest barrier to entry. The EMA (9) at 121.3 is above the EMA (21) at 119.6 (1.7 points above, status: near), and MACD is positive at 1.48, both consistent with the uptrend the strategy wants to fade — but the RSI ceiling has not been breached. ADX at 46.6 (well above the 25 threshold) and price above the EMA (50) are already met. The backtest of this rule set on COP over 60 months produced 39 trades with a 30.8% win rate and a cumulative return of −7.0%, with a maximum drawdown of 9.4%. Those numbers do not support the setup as currently configured — the strategy lost money in its only tested pair, and exits were filled on daily bars rather than intraday, meaning the reported drawdown may understate actual risk. A hard stop at −2.5% and a take-profit at +5.0% give an effective reward-to-risk ratio of roughly 2:1 on paper, but the 30.8% win rate is well below the ~25% breakeven that ratio implies — the strategy would need to win about one in four trades to break even, yet it has only won about one in three, which is not enough given the magnitude of losers in the sample. "Wait" means exactly this: do not enter any of the five short positions today. USO RSI is at 84.3 and needs to fall to 65 or below. Until that happens — which would require a meaningful pullback in oil — the EMA cross, ADX, and MACD conditions are moot. There is no actionable trigger level in price terms until RSI cools. If USO does pull back and RSI drops below 65 while the EMA (9) is still above the EMA (21), that would be the first window to evaluate the setup. Given the backtest results, even then the burden of proof is high.

Energy momentum has fundamental fuel and a policy tailwind

The idea's core thesis — that geopolitical tension and the Jones Act waiver extension are lifting energy majors — finds solid support in both the news flow and the fundamentals. Per the CNBC piece, President Trump extended the…

Scores

• Conviction score breakdown: 30
• Thesis support: 45
• Trade readiness: 10
• Risk quality: 35
• Backtest evidence: 20
• Fundamentals trend: 40

Watch items

• USO — RSI (14)
• USO — EMA (9) vs EMA (21)
• USO — ADX (14)
• USO — MACD (12,26,9)
• COP — COP 60-month backtest win rate
• COP — EMA (9) crossed above EMA (21)
• COP — ADX (14) above 25
• COP — RSI (14) below 65
• COP — RSI (14) above 40
• COP — MACD (12,26,9) above 0
• COP — Price above EMA (50)