ETF Reflections: Energy

I’ve probably over-mentioned this, but energy is my favorite bearish sector. I’ll start off with the commodity fund, symbol DBC, which has completed a well-formed diamond pattern. These are rare (well-formed ones, at least) and important reversal signals.

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More specifically, energy has been breaking down for many weeks. First, it failed its ascending trendline that goes back almost ten months, and second, it double-topped and broke resistance with a gap-down on Thursday.

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I have set myself up to benefit from this observation by way of October XLE puts, which is my largest position by far. This head and shoulders pattern is complete, and I think its major support is a long way from here, somewhere in the mid-30s.

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I found the XOP pattern choppier and less appealing, what I will say this: XOP’s ability to bounce up to its 50% Fibonacci resistance line perfectly and then turn tail was an eye-opener.

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Preface to all ETF Posts: I am composing this on Thursday afternoon, so the charts will be up-to-date as of then. I wanted to make some general comments about specific ETF groupings, principally to ...

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