Bullish On The Energy Sector (XLE)? Wait For Confirmation

The Energy Sector (NYSEARCA:XLE) looks primed for a breakout. Should this occur, it would have huge implications for energy stocks and related ETFs.

Today we’ll look at the daily and weekly charts for the sector ETF (XLE).

Are the bulls about to run? And will Crude Oil futures and other oil related ETFs (NYSEARCA:USO & NYSEARCA:OIL) cooperate with the bulls plans?  Let’s have a look.

Looking at the Energy Sector chart (XLE) on a Weekly time frame:

• The energy sector began a precipitous decline in Summer 2014 on dollar strength/ending of U.S. QE.
• The downtrend was broken in April 2016 as the Federal Reserve backed off rate hikes softening the U.S. Dollar.
• A bullish inverse head & shoulders formed with the Energy Sector ETF while sporting heavy short interest ~15%.

The Energy Sector ETF (XLE) bullish reversal is fueled to break out – a measured move would be to the high $80s.

But…(read further below)

Looking at the Energy Sector on Daily time frame:

• Energy (XLE) is poised for ~20 points of measured upside but daily rejection at neckline thus far.
• Energy (XLE) RSI bit of a bearish divergence with A/D line and up/down volume both unconfirmed.
• As well, crude oil is breaking near term support and has slipped below the 9 day EMA with a fail candle.

The net net is a bit of prudent watching and less doing until the bullish reversal with “short fuel” confirms.

Thanks for reading.

Twitter:  @JBL73

The author does not have a position in any mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.