Positive Energy in the Energy Sector

Oil has been a mess the past week. Large oil company stocks are flailing. Beyond that many segments of the energy sector have fallen 10% or over the last 2 months. It is getting ugly. But when I look at the chart of the Energy Sector ETF ($XLE) things look much less troubling. In fact this may be the time to buy.

How many times have you decided that you want to buy a stock and sit there wishing for a pullback to get it cheaper, only to watch it continue to rise, keeping that frown on your face? If only it would hit a speed bump and pullback just a little. And then when it does pullback you get anxious about the drop and worry that it could keep going lower. So you don’t buy. It reverses and you are back to frowning and wishing for a pullback.

The chart above of the Energy Sector ETF ($XLE) is in one of those situations. It started higher in the beginning of November, reaching a peak in mid-December. It gave one opportunity to buy a pullback along the way, but for the most part trended higher the entire time. Since mid-December it has had a steady decline. Now it is down nearly 9%. Do you want to buy it?

Perhaps you do. The chart printed a Hammer Candlestick on Wednesday. The Hammer, with the long lower Shadow, is a potential reversal candle. A reversal would confirm on a higher close Thursday. That is what to watch for. The bottom of the Hammer can then be used as a stop loss level. This Hammer is happening at the 61.8% retracement of the last move higher. This key Fibonacci ratio is a focus point for a reversal for traders. A reversal here would gather attention, and money. As I write in the pre-market the it is moving higher, but it is the closing price that counts. Keep your energy focused here.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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