This week’s Chart of the Week features the XLE ETF (Energy Select Sector SPDR). We have seen XLE bounce off of its lows as oil rallied well above $55 over the last couple months. However, at this point in time, we are seeing a very bearish set up for the ETF. XLE closed the week at the top of a technical channel that we have seen dating back to July 2015, and we expect this to be the top right at $70. Additionally, we are utilizing a momentum study tool this week called the UltimateOscillator which has been accurate in portraying the previous three tops in for XLE. The previous three times XLE topped, we saw this Oscillator hit 0.6. After marking a top based on the Oscillator, we saw an average decline of 27.13% which leads us to our price target of $50.75 for this trade. To the downside, we watch the bottom end of the channel at $65, then the two downtrend lines we have indicated at $57.80 and $55.10. Overall, it appears that the energy sector has significant downside ahead and we see a great opportunity to short XLE right now.
Farewell and Trade Well,
Founder and Editor-in-Chief