Trade idea: On XLE, use a pullback to $65.25 to enter or add to long positions, writes Mike Paulenoff, veteran technical strategist, author, and host of MPTrader.com.
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We have been watching the Energy Select Sector SPDR (XLE) for some weeks now as it has turned up from its position towards the bottom of its 9-month declining channel. Specifically, it hit a low of 61.81 on August 18.
On September 7, we noted to our members that the XLE had looped up towards a confrontation with its December-September down trendline. At that point, the stock was at 65.09, with its 200-day moving average pointing towards 69.26.
Fast forward a week, and the XLE took out this trendline and closed yesterday at its high of the day at 66.27.
The stock looks poised for still-higher levels that project to a test of the June-September resistance zone at 66.80-67.13.
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If hurdled and sustained, this will confirm a significant bottom and also point XLE towards a confrontation with its moderately declining 200 DMA, now at 69.11.
Traders could use a pullback to 65.25 to enter or add to long positions.
See charts illustrating the technical pattern on XLE.
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