The Energy Select Sector SPDR ETF (XLE) is very popular and important sector trading vehicle of the stock market. The XLE has recently rallied quickly from its lows in March on the heels of OPEC's recent production cut announcement.
With crude oil at $81 a barrel let's check out the charts and indicators to see if we should buy into this current advance.
In the daily bar chart of the XLE, below, I can see that share prices broke below the 200-day moving average line in early March and then rallied back above at the end of the month. Prices broke below the average line in July and September but only for a few days. The most recent break of the 200-day line was the longest and most troubling.
The On-Balance-Volume (OBV) line shows a pattern of weakness from November. The Moving Average Convergence Divergence (MACD) oscillator is poised to cross above the zero line for an outright buy signal.
In the weekly Japanese candlestick chart of XLE, below, I see a mixed picture. Prices tripled in the past three years and a strong uptrend has shifted into a sideways trend the past six months. Prices are above the rising 40-week moving average line.
The weekly trading volume has been declining since early 2022 and that is not the pattern we want to see. The weekly OBV line shows a rising pattern suggesting the opposite of the visual presentation of trading volume. The MACD oscillator shows weakness from June and is only slightly above the zero line.
In this daily Point and Figure chart of XLE, below, I can see a potential upside price target in the $109 area but I can also see a fair amount of overhead price resistance looking at the volume by price bars on the left scale.
In this weekly Point and Figure chart of XLE, below, I can see that prices reached a downside price target of $75 and the software has not shifted to an upside price target yet.
Bottom-line strategy: The charts and indicators of the XLE are mixed and I am not convinced that new highs are coming soon. I plan on keeping an open mind on the next move.
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