Trade view /
07 June 2016 at 9:04 GMT
As US stocks continue towards new heights, more defensive sectors as well as dollar-sensitive areas like energy stocks are coiling up for further moves higher. The energy sector ETF of the S&P 500 looks poised for another leg higher.
On May 30
I discussed a bullish trade setup in energy/integrated oil company Chevron. The stock still looks bullish and upon a break past resistance it would signal a breakout worth taking for a trade.
The energy sector ETF of the S&P 500 (XLE:arcx) in April made a clear statement when it broke about the down-trend channel represented by the two blue parallels. Over the past few weeks, however, the price action has mostly been sideways as a thus far constructive consolidation of the April breakout was taking place.
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On the daily chart we see that this recent multi-week consolidation is taking place nicely above the red 200-day simple moving average and right at a diagonal resistance line (black). By definition, the longer the XLE etf coils up below this diagonal resistance line and above the 200-day moving average the better the odds of another leg higher.
Management and risk description
From a risk management perspective it likely doesn't pay to chase energy stocks higher until a breakout is finalised. Looking at the chart of the energy sector ETF of the S&P 500 (XLE:arcx) however this looks to be taking place very soon.
: Buy the XLE etf or CFD at $68.20 or higher
: 2–4 weeks
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more