Medium term
Trade view / 13 July 2016 at 8:12 GMT

Bullish breakout in energy ETF

Instrument: XLE:arcx
Price target:
Market price:

We have identified the possibility of the Energy ETF XLE:arcx being in a fifth and final advance off the lows set back in January before. The question was if the wave was going to be a short one or if it was set to extend; it appears as though it is going for an extension.

The XLE has now fulfilled the requirement for a breakout trade set up as it has closed above the key $69 pivot after the key date of July 4, following the price extreme on July 1. Time cycles are now signaling higher prices into July 18 and if it continues higher from there, August 9 and possibly even September 8. 

From a price perspective, we now have resistance at $73, $77 and $81. Support is found at the $69 and $66 levels.

Management and risk description

The plan is to buy the XLE:arcx above $69 aiming higher into the $73 and $77 levels. The stop can initially be placed at the $66 level. 

Fifth waves are tricky in the sense that they are often either short or long, sluggish or strong and explosive. We should have been able to rule out the short alternative, but it could still be a sluggish one. The main risk to this trade view, however, is a weak oil price and general stock market weakness which would most likely weigh on this ETF as well.


Entry: buy above $69.

Stop: $66.

Target: $73 and $77.

Time horizon: one to four weeks.

XLE:arcx daily chart:
XLE:arcx daily chart

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Source: Saxo Bank 

XLE:arcx daily development chart:
XLE:arcx daily development chart
Source: Saxo Bank 

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more
charitymemae charitymemae
This comment has been redacted
Johan Berntorp Johan Berntorp
I have had to change the count on this one due to recent price action. This is similar to LUPE:xome and is now in a zone time wise for a reversal higher. 3-3-5 pattern, which is complete should transpire into a substantial move higher. The risk is however this wave lower, following a bounce extends lower. In any case the stop and parameters are about correct anyway, we could have gotten a better entry though.


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