XLE trade ideas
XLE a trade or an option trade, your pickThis ETF got rejected on a D1 time frame at the 23 Fib retracement...
With a complete retrace back to 0..., almost like a reverse cup and handle... look out below..
1: 1 Risk to reward, even more if your daring...
2. Sell the 62 Puts 2 weeks out, and buy the 64 put January... net cost is 3.47... keep rolling, and booking premium while the pair slides lower
Head and Shoulders Vs. Bearish BatXLE is slowly making its way towards a very interesting weekly support zone - 60-62$
Notice that this price zone is the 61.8 Fibonacci level from 2009 low and from 2016.
Also notice that it is the neckline of a weekly H&S pattern.
If it will break, XLE can fall to 55$ and maybe even 50$
If it will hold as support, the extremely bullish scenario is that it will climb all the way up to complete a bearish Bat near 95$
Obviously it will have to re-test the MA lines as resistance levels first
Agree or Disagree?
It's Sunday.. you can read more about this setup and others in the newsletter
#WeeklyMarketsAnalysis (search on Twitter)
XLE flag weekly / double bottom dailyHorizontal S&R: dialy and weekly
Channel S&R: yes
MA S&R: some, 20ma
>200ma: no
Volume confirmation: yes
Candle Confirmation: no
Stoch Divergence: yes daily
Reg Trendline >85: yes
Short Float: n/a
Risk / Reward: 1.3 & 2. hope to get some at $65
Any feedback is welcomed.
looks like a good setup, though oil is a highly manipulated market.
THE WEEK AHEAD: XOP/OIH/XLE, COSTPremium Selling
For the umpteenth week in a row, there is little in the market for high quality premium selling plays. Screening for 52-week >70 implied volatility rank, you'll basically get one quality hit at the moment, and that is COST, which has dipped significantly on AMZN/WFM merger news. A few names are approaching that 70 mark, but they have earnings three to four weeks out; you might as well wait to put on volatility contraction plays around earnings announcements in those cases. I previously set out a nondirectional play in COST (see Post below) that I didn't enter, having been distracted by something or other; I may reconsider that play now that the market's had an opportunity to digest the AMZN news.
Other names, such as NBR (petro, part of whose operations are deep water),* RAD (pharmacy in merger and acquisition with WBA), and BBRY (a kind of WTF, why are they still around) are too small in dollar value to be worth playing unless you dive in and go straight-on covered call or near-to-the-money short put.
Directionals
I've been waiting for several weeks to put on a bullish XOP, OIH, and XLE play. Each time I look at them, it appears that oil has trundled lower on rising rig count, total stock build, lackluster inventory draw, or a combination thereof.
I've been primarily watching oil prices around the supposed average shale production break even at $40 to go long in one of these underlyings. We may be close enough for me to make a play, but I'll probably continue watching. Lower is better for either a net credit put diagonal or a Poor Man's Covered Call in these guys.
Low Volatility Plays
With VIX continuing on its sub-12 bender, there probably isn't a better time to go put-side low volatility strategy in broad index underlyings (SPY, IWM, QQQ, DIA) using either calendars, net credit put diagonals, or debit diagonals. These capitalize on volatility expansion and movement of the underlying toward the put side, ideally allowing you to exit the short put aspect of the setup at worthless and recapture any value left in the long at the expiry of the front-month short. Heck, the dam has to break at some point ... .
* -- I regard most companies that rely substantially on deep water operations as largely doomed here. Most deep water operations require high per barrel prices that we haven't seen for a substantial period of time and aren't going to see in the short- to medium-term.
ERX/XLE - BreakingAfter the weekly key reversal and a follow through here is our trendline break on the daily chart.
I'm making the call : the energy sector has bottomed.
Oil has bottomed on the 5th of May and it's just coming out of a severe half cycle low . ERX/XLE bottomed a few days ago on the 7th of June.
We are above not just the 10 but also the 20 EMA and right now attacking the 50 EMA.
RSI is heading to overbought but if I'm right it will be overbought for a long time...
If it breaks out finally it has months to run.
ERX/XLE - New hopeFinally we have a reversal candlestick on the weekly chart in XLE.
It's not just a simple reversal candle but a key reversal.
Those who follow me for a while know that this is one of my favourite candlestick especially on the weekly charts.
The daily key reversal is also very good. But the weekly is rare one and almost always followed by big follow through candles - in this case green ones.
The bullish key reversal is valid when:
the bullish monthly (daily) candle (green candle) low is below the previous month's (day's) candle low and the bullish reversal candle's close is above the previous candle's high.
Even better the key reversal is when the bullish candle's open is below the previos candle's close and the close above the high of the previous candle's high.
I used to call the key reversal a super swing also. Actually we will get a swing low when we berak above this week's high next week. But I think as we printed a key reversal it's no use to wait for the swing because after the weekly key reversal the swing is always coming... And it's usually arriving with a big gap.
Many will ask why didn't we wait for this reversal then we could have a better entry price.
The reason because no one can tell if this kind of reversal ever coming or not.
And this is the time when it will be hard to tell when to enter here... The time to enter in ERX and XLE was Friday.
Of course we might open where we closed but watching the volume and violence how ERX and XLE was rallying on Friday I say there is a decent chance that we open by a big gap and my early entry will be in big plus.
And while many will be waiting for a gap close price might never look back again just run...
I will come back to this weekly chart many times in the following months.
The next mission is to close back above the 10 EMA and break the trend line.
I really can't tell you how far it can go as this sector is really suppressed right now. If the sentiment is changing it will need to work down the divergence between the energy sector and the SM what is at all time highs.
So I really think this rally will be not just big but a very fast surge with all the analysts and traders trying to short it who missed the bottom.
Their stops will accelerate this move.
I will be watching closely the indicators:
The RSI should get overbought in the following months plus MACD neeeds to cross over and head higher.
And the SlowStochastic needs to get overbought and stay there for weeks...
The volume is really good for a reversal again. Notice how the volume spikes signed the previous bottoms in the past.
