Buying Some Energy

• Posted by Greg Harmon
• on August 21st, 2014

The energy ETF, $XLE, had a remarkable run higher over the first 6 months of the year. But then it stalled out and started to pullback a bit. Crude oil rolled over and has been falling and the ETF has been hand off. But it is now time to buy some energy. The daily chart below shows the run up and dip. But most interesting is the interplay with the 3 Simple Moving Averages (SMA) shown, the 20 day, 50 day and 100 day. Notice that the 20 day SMA (red) had acted as support and when that failed in July the price moved lower. The price fell and then found support at the 100 day SMA (purple). It is getting a lift off of that now and crossed above the 20 day SMA again Wednesday. An aggressive trader could get involved now against the 100 day SMA as a stop, and a more conservative one when it moves over the 50 day SMA (blue). For the technical analyst the momentum indicators are supportive of a move higher with the RSI heading higher and the MACD crossed up and rising.

A long term trader can also get excited as the weekly chart below shows the price getting a push higher from the 20 week SMA, the rough equivalent of the 100 day SMA, and using a move below that as a stop loss.

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