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OIL MAY BE FORMING SHORT-TERM TOP ...

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Today's selloff in oil of more than two dollars may be completing a right shoulder in a short-term head and shoulders top in the key commodity. The September bounce has fallen well short of the late-August peak (the head) and is about equal to the early August peak (left shoulder). It's now challenging its 50-day average and may be headed for a test of the neckline near 62.50. A close beneath that support line would turn the short-term trend down. That would weaken energy stocks even further. I'm not suggesting that the long-term bull market in energy is over. I am suggesting that it's come too far and is need of some correcting. I also believe that the price spikes from the two recent hurricanes have probably been overdone. What better time to take some energy money off the table when TV stations are talking about nothing else. One TV station showed a chart of the XLE yesterday and said it was a good thing to buy when oil prices are rising. That's the "kiss of death" in any rally.

 

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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