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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.

2 Comments:

Blogger TheKing said...

Good analysis. Your shared thoughts are appreciated!

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

thanks!

10:20 AM  

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