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Wednesday, January 07, 2009

Watch for Pullbacks in Energy Stocks

A Happy New Year to all! I was sick over the new year, hence the inactivity in my blog. But other than this minor hiccup, I look forward to an even more wonderful year ahead!

Energy Select Sector SPDR (NYSE:XLE) was coiling in a symmetrical triangle formation and broke out on the 1st trading day this year. However, I would caution going long or buying a call option on it now. It has been marching north for the last few sessions and it printed a shooting star at resistance (about $52.5) after gapping up yesterday. If it breaks below previous day low, I expect to see retracement and then it maybe a good time to enter. You can place fibonacci level over previous swing low to the high yesterday to see where the 38.2%, 50% and 61.8% retracement levels are.

Above is a chart of United States Oil Fund LP (NYSE:USO). Basically telling the same story. Broke out of downtrend channel with good volume but now facing resistance near $40.

So what we can do now is to monitor XLE, USO and oil related stocks closely for possible retracement, set your alerts and then time for lower risk entry.


Blogger TheKing said...

Good analysis. Your shared thoughts are appreciated!

2:29 AM  
Blogger Simply Options Trader said...


10:20 AM  

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