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Has the Energy Sector Bottomed?

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Today Energy (XLE) was the best performing of the eleven SPDR sectors we follow.

I have been watching the Energy Sector (XLE) for a few weeks, wondering if it was finally setting up for a rally. Price reached the bottom of a nine-month range, and the PMO bottomed, but that PMO bottom looked pretty shallow -- I prefer more decisive turns, such as the one back in July. At the beginning of this month there was a double price bottom, but the rally off the second bottom failed to execute a break out. We use a ton of indicators on the eleven sector charts we follow, but in this case the best we can say is that they are confirming price movement, not giving us useful divergences. Confirmations are really no help.


In the end we are left with basic price pattern analysis, which has been around long before the more sophisticated internal indicators were invented. What is most apparent is the bearish reverse flag formation, the flag portion of which is a rising wedge. In either case the technical expectation is for the formation(s) to resolve downward. So to answer my original question, no, the technicals say that the Energy Sector will probably go lower.


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Happy Charting! - Carl


Technical Analysis is a windsock, not a crystal ball.


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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 DecisionPoint.com, 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 StockCharts.com in 2013, Carl has served a consulting technical analyst and blog contributor. Learn More
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