Failed Breakout at Resistance — Left Translated Cycle Formation in Play

Summary

XLE broke above 46.50 on Friday but reversed into a bearish close.
Monday delivered bearish follow-through, forming a swing high.
Pattern favors a left-translated daily cycle, increasing downside risk.
A close below the 10 day MA will confirm the daily cycle decline.
A close below the lower daily cycle band would begin a daily downtrend.

XLE had been contained by resistance at the 46 level — until Friday. XLE broke above 46.50 on Friday, appearing to signal a bullish breakout. However, momentum quickly faded, and XLE reversed lower into the close, forming a bearish reversal candle.

That weakness followed through on Monday, with XLE forming a swing high. This sequence — failed breakout followed by a swing high — sets XLE up for a left-translated daily cycle formation, which carries bearish implications. A close below the 10 day MA will confirm the daily cycle decline.

XLE remains in a daily uptrend for now. But a close below the lower daily cycle band would end the daily uptrend and begin a daily downtrend, shifting the trend structure decisively bearish.

Cycle Trading