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RECENT DECLINE IN XOI CORRECTIVE

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Quite simply, the recent decline in the AMEX Oil Index (XOI) appears corrective in nature; and thus one would want to be long these shares at this time as the risk-reward parameters are now favorable.

If past is prelude, and although it is not perfecta simple rhyme will do; the current correction is testing the sharply rising 110-day moving average, which when coupled with the lower 40-day stochastic level has provided excellent buying points over the past several years. If this test is successful as we expect; then a test of the highs is forthcoming. Therefore, we are long shares such as Exxon (XOM) and Chevron (CVX); but looking to add more and add oil service shares as well.

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More
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