Energy - The Charts Say Sell the News

Resistance is real and the energy sector looks to be struggling.

If you caught the news you heard about tanker ships taking different routes to avoid attacks in the Red Sea. Investors and traders are sorting out what that means for stocks in the energy sector.

Sometimes news like this will blow up a chart, but when it doesn’t and support or resistance holds, it adds to my conviction in trading against these same levels.

Breaking down XLE, the SPDR Energy ETF, there are many reasons to be bearish. Add in the chart for OIH, the VanEck Oil Services ETF, and you will see why I have taken a short position in the energy sector.

XLE

XLE Daily Candles

• Heavy candles have rejected between $84-85 since October

• Rejected Monday at the 50d SMA, also below the 150d SMA

• RSI hinged down at the midpoint, and has been weak

• Lower highs and lower lows continue to be the trend

OIH

OIH Daily Candles

• In a clear downtrend and rejected off the top again Monday

• Rejection is also at the 150d SMA, also below the 50d SMA

• RSI has been weak and remains in the lower half of its range

• Candles are tracking the lower half of the channel, bearish

I’m not one to let a trade opportunity pass me up!

This sets up nicely for taking a short position in XLE, which is exactly what I did.

Let’s break down the trade idea and walk through the strike price, expiration date, and profit targets.