In a recent post I highlighted how we always want to trade with the trend, and with the major trend being up a buy the dip mentality should be most profitable. But with some signs of trouble on the horizon (no the trend hasn't changed YET) it is possible for more aggressive traders to look for shorts in sectors that have been underperforming. One such sector mentioned in a recent post is XLE. This sector has been one of the weaker S&P sectors since the beginning of the year and was also -4% for the month of March. Below is a weekly chart of XLE with a 12 week moving average showing last weeks close below and this weeks high so far is right on the 12 week moving average. So yes, XLE is struggling which means its components are struggling.
Within XLE (and other underperforming sectors) is where you would want to look to sell longs if you havnt already done so, or look for shorting opportunities if you are aggressive. Although you can screen for any one of the sector components, 2 of the biggest (SLB and OXY) look ripe for a further fall. Both charts are included below...
SLB has already fallen below all 3 of its major moving averages and is close to making a lower low which would likely put pressure on price towards $65...OXY is close to breaking below its 200day moving average where a close below on above average volume would set up price to fall further towards $90 or possibly $85. Closing prices are key and volume is an important indicator of psychology -- so keep both in mind always.
Questions and comments welcome.
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