Energy is cooked. Stick a fork in it. Goodnight Irene, Irene Goodnight. The jackasses are coming out of the woodwork telling you to buy energy stocks with both hands. Of course they are because they are dumping their shares. Charlatans. The purple circles on the daily chart show 4 distribution days this month the smart money selling energy stocks to the dumb money; the suckers. Are you a bag-holdin' sucka?
The ole pump and dump scheme is in full effect right now with rampant cheerleading of the energy stocks. Fund managers, whose main goal is to bring money into the fund, proclaim that now is the time to buy energy stocks with both fists as opposed to three months ago when they were 20% to 30% lower? Huh? The pundits are pumping and dumping getting Joe Sucka all bulled-up on energy stocks and the pumper just so happens to have some shares he can sell you. The smart money is in distribution now having enjoyed and profited from the big 3-month rally.
You can see the M-Top, or Double-Top, formation on the daily and monthly charts a bearish chart pattern. The far leg of the M is now playing out in these time frames and obviously the M on the monthly chart tells you that energy stocks are entering a multi-month down move.
The charts display rising red wedges a bearish chart pattern. Indicators are overbot agreeable to a pullback in all time frames. The daily chart was cooked and topped-out a couple weeks ago and there was no reason for price to come back up again for another high in this daily time frame but the maroon arrow shows that price did spike intraday on Thursday, probably as a television pundit was promoting energy stocks. Pause for laughter.
The maroon lines for the indicators on the daily chart show clear negative divergence that wants to smack price lower in the daily time frame. The ADX line is nowhere near 30 for the last half year which states that the big 3-month rally in XLE was NOT a strong trend higher in the daily time frame. In other words, something that was never strong to begin with would not be expected to continue. The lower band and 50-day MA are in play at 88.
The XLE weekly chart displays a bearish rising wedge and 4 distinct tops across the upper trend line. The ADX, however, shows that the trend higher has weakened during each of the Four Tops a bearish indication. The pink box shows that the ADX identified a strong trend higher during the first half of 2022, on the weekly basis, but not since. Price is stumbling choppy sideways for the last year through 72-92.
The upper band is violated on the weekly chart so the middle band, that is also the 20-wk MA, at 84, is on the table as well as the lower band at 74. There is strong price support in the 74-77 area (blue line). Stochastics are overbot on the weekly chart agreeable to a pullback.
The negative divergence is glaring on the weekly chart beginning a multi-week downturn. The Aroon green line on the weekly chart shows that nearly all energy bulls remain bullish and the red lines shows that about two-thirds of the energy bears also believe that XLE will continue higher forever. Most everyone believes that energy stocks will go higher but the Aroon is a contrarian indicator (the expectation is for a retreat in XLE and a negative red cross).
The monthly chart is scary if you are long energy. Energy is placing a bigtime multi-month top right now due to the universal negative divergence across all chart indicators (red lines). Price is out of juice to the upside so XLE must bend over and receive its spankdown.
The ADX on the monthly chart shows that the big drop lower in XLE as the COVID-19 pandemic hit in 2020 was a strong trend lower but that petered out as 2021 started (due to the obscene Fed (monetary) and Congressional (fiscal) stimulus (irresponsible spending). Energy stocks launched higher off the possie d bottom (green lines) and bags of easy money. The ADX shows that the rally higher in XLE was a strong trend in the backhalf of 2022 and into this year but the strong trend higher on the monthly basis is now petering out.
XLE is pumped up to 93 near the upper band at 94.58 so do not rule this out as a blow-off top as October begins (94-97). The middle band at 80 would then be in play (about -20% lower). Right now, energy bulls are picking up nickels in front of a bulldozer.
The three XLE charts representing the daily, weekly and monthly time frames are ugly and bearish. You do not want to be long energy stocks; instead choose your entries to be short. Energy stocks are topping now and should fall in price for several months probably into the first part of 2024. Don't be a sucka. Let the institutions hold the bag for a change. Keystone is not in energy stocks long or short right now but would look to play XLE or ERX short or ERY long going forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 10/2/23, Monday Morning, at 4:18 AM EST: XLE begins the new week of trading at 90.39. For all of you long energy stocks, are you starting to clench your buttocks and wipe beads of sweat from your forehead?
Note Added 10/3/23, Tuesday Morning, at 5:07 AM EST: XLE collapses -2% to 88.59 the lowest since August.
Note Added 10/4/23, Wednesday Morning, at 9:55 AM EST: XLE is puking -4.5% this week thus far. Of course it is. Energy is receiving the neggie d spankdown.
Note Added 10/5/23, Thursday Morning, at 7:40 AM EST: XLE pukes over -5% this week thus far. The neggie d spankdown continues in energy and as forecasted with oil. XOM collapses -5.2% so far this week with CVX down -3.3% and OXY down -4%. Warren Buffett the senile jackass always liked Occidental and probably still owns a boatload. OXY has crashed more than -12% in the last 15 days. XOP collapses more than -7% this week thus far..
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