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Wednesday, August 27, 2008

What's Next for Energy Sector?

Last week, I talked about expecting a quick rebound in energy. The next day, Energy Select Sector SPDR (AMEX:XLE) broke through $70 support but closed above it, washing out existing buyers who had stops at $70. It then staged a strong rebound, up almost $7 in 3 days, gapping up 2 of the 3 sessions. I hope you have taken advantage of this rebound. Energy (& commodities) are always very volatile, and it is best to take profits especially with such a good move over such short period of time. On top of that, we are trading against the downtrend.

I would not initiate any new trades on energy sector at this point as I noticed the pullback last Fri and this Mon was on much lower voluume and its possible there could be another leg up. When in doubt about the direction or the trade, DON'T TRADE. There are always better opportunities out there.


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