Larry’s Note: Tomorrow night I’m releasing my urgent warning…
A market shock is coming in just a few days, where as much as $1 trillion could change hands in a single day.
Most people aren’t prepared for the volatility. But if you act now, this event could put you back in the black for the year. That’s because I know one single ticker that can help us turn this shock in our favor.
If you haven’t already, please RSVP to attend now. I’ll go live tomorrow night at 8 p.m. ET.
In the first half of 2022, oil prices only went up.
And with crude oil trading at its highest levels in a decade, the Energy Select Sector SPDR Fund (XLE) went through the roof.
From the start of 2022 to its June high, XLE rallied a massive 70%.
However, in June momentum sharply declined. XLE lost 30% of its value in one month.
As buying momentum gradually returned through July, XLE was able to form a base and rally.
When we last checked XLE a few weeks ago (red arrow in the chart below), it was showing increasingly bullish signals.
Today, we’ll see what’s happened since then and where it’s headed next…
A Change of Direction
On the chart below, you can see how the Relative Strength Index (RSI) reversed sharply from overbought territory (upper grey dashed line) in early June.
This collapse in buying momentum caused XLE to top out at ‘A.’
Energy Select Sector SPDR Fund (XLE)
Source: eSignal
With the RSI heading straight down through support (green line), XLE’s downward move accelerated before eventually fading into a new chart pattern.
As XLE was making lower lows (upper orange line), the RSI had formed a double ‘V’ out of oversold territory (lower grey dashed line) – and began to make higher lows (lower orange line).
When the RSI and the stock price diverge, a change of direction is likely.
And that’s exactly what happened. As momentum increased, XLE was able to turn around and trend higher.
Last month, there were two key technical signals I was watching to gauge whether XLE’s rally would continue…
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The RSI would need to keep tracking in the upper half of its range.
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With the two moving averages (MA) moving closer together, we would need to see the 10-day MA (red line) break back above the long-term 50-day MA (blue line) and accelerate higher.
While both scenarios played out, you can see below that the RSI once again ran into overbought territory (red circle).
Energy Select Sector SPDR Fund (XLE)
Source: eSignal
It formed an inverse ‘V,’ reversed, and started tracking lower. XLE then formed another peak at ‘B’ before it also rolled over to follow the RSI down.
Now, with the RSI straddling the support level, what can we expect from here?
A Key Support Level
What happens around the RSI’s support level is key to XLE’s next move.
If the RSI breaks down through support and gets stuck in the lower half of its range, then this downtrend in oil has further to go.
But if the RSI can hold support and remain in the upper half of its band, then XLE’s pullback should fizzle out.
In that case, XLE would likely resume its uptrend that kicked off in July.
Likewise, if the 10-day MA accelerates above the 50-day MA, then it would increase the likelihood of the uptrend continuing.
But there’s another big move I want to put on my readers’ radar…
Next week, there’s going to be a market shock worth an estimated $1 trillion.
Wall Street insiders are prepared for this event and are getting ready for double- and triple-digit gains. But the sad truth is most people simply don’t have a clue.
That’s why I’m giving you access to a special briefing tomorrow at 8 p.m. ET, where I’ll share exactly what’s going to happen… And how we can turn it around to our advantage.
Please click here to reserve your spot.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
Reader Mailbag
In today’s mailbag, One Ticker Trader members share their recent trade profits…
I’m a new subscriber to One Ticker Trader. I was able to participate in two trades on Invesco QQQ Trust Series 1 (QQQ) – both winners. Please keep them coming! Thank you for a timely alert on the QQQ call close before Jerome Powell’s speech!
– Igor V.
Your last Friday call to close the QQQ call before Powell came on air is right on the money. As soon as I got your alert, I jumped on the computer and closed my position right before 9:45 a.m.
As a matter of fact, I closed all my other stock positions that are in green – because I know if your call is right (which it’s always right) – then it’ll mean the whole market is going to tank.
So as a new subscriber, I’m glad to inform you that I made a profit on the QQQ transactions. Thank you, Larry! You are the best!
– Mingyi Z.
Thank you as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].