Buying Opportunity for Energy?

Carl Swenlin

Carl Swenlin


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The energy sector has gotten pretty beaten up, and we were wondering if a buying opportunity might present in the near future. After looking at the chart we see that there is the possibility of a double bottom. The Energy SPDR (XLE) has declined over -23% since the June top, and, with the 50EMA being below the 200EMA, XLE is in a bear market. After a bear market rally off the October low, price is approaching the support of that low again, and the possibility of a double bottom formation is something we should watch for.

Today's action shows price trading lower but closing higher on high volume, a positive note.

Essential to analysis of this sector is an evaluation of crude oil, for which we use the U.S. Oil Fund (USO) as a surrogate. We see that, even though USO has started the week with an uptick, it has broken long-term support and the next significant support is still much lower.

Conclusion:  We like the potential of double bottoms, and while the long-term outlook for this sector is still pretty grim, another bounce off the October low (or near that low) may provide a short-term buying opportunity.

Carl Swenlin
About the author: is a veteran technical analyst who has been actively engaged in market analysis since 1981. A pioneer in the creation of online technical resources, he was president and founder of, one of the premier market timing and technical analysis websites on the web. DecisionPoint specializes in stock market indicators and charting. Since DecisionPoint merged with in 2013, Carl has served a consulting technical analyst and blog contributor. Learn More