Watch for Pullbacks in Energy Stocks
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.