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Energy Resting At Key Pivot Area

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2016 has been a very good year thus far for the energy sector (XLE) as it's gained 17.51% in just the last three months alone.  Unlike many of the other sectors that have been battling slowing momentum in the form of negative divergences, momentum remains very strong for the XLE on the daily chart.  Check out the three month chart:


In addition to recently breaking out on an absolute basis, energy has been performing exceptionally well relative to the S&P 500 where we've also seen a breakout.  The recent selling likely is providing a late entry into this sector for those who have missed the initial move.  I'd be careful if the 64.50-65.00 area fails to hold as support, though, as it's been a very critical pivot area over the intermediate-term.  Here's a chart of the XLE over the past couple years:

The blue vertical line marks both the absolute and relative breakouts.  The horizontal line on the price chart shows that 64.50-65.00 has provided both excellent support and resistance over the past year, so it's important for the bulls to support the XLE at that level and so far they have.

I would continue to look for leadership from energy until both price and relative support are lost.

Happy trading!

Tom

 

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Tom Bowley
About the author: co-founded Invested Central in 2004 and served as the site's Chief Market Strategist for more than 10 years. Invested Central provides stock market education and guidance for those interested in making their own financial decisions. During his tenure at Invested Central, Tom co-hosted Market Open LIVE, a national radio broadcast that covered many of the largest markets across the U.S. In addition, he has spoken at various conferences throughout the United States and Canada and has taught thousands of traders across the globe how to trade equities more wisely with an emphasis on managing risk and intermarket relationships. Learn More
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