Cycle Trading

Summary

• XLE was rejected at key resistance near 46
• A swing high and close below the 10 day MA signaled the daily cycle decline
• Bearish follow-through pushed XLE below the 50 day MA and the prior DCL
• Failed daily cycle confirms the intermediate cycle decline
• Energy has transitioned into a daily downtrend

On 12/04 we highlighted that Energy (XLE) was running into key resistance at the 46 level. XLE spent several sessions consolidating just below that level, but resistance ultimately held.

On Friday, XLE was rejected at 46, forming a swing high and closing below the 10 day MA. That price action signaled the start of the daily cycle decline. Bearish follow-through followed on Monday and Tuesday, confirming that sellers had regained control.

On Tuesday, XLE is in the process of breaking below the 50 day MA. XLE also broke below the previous daily cycle low on Tuesday. Breaking below the prior DCL forms a failed daily cycle, which confirms that the intermediate cycle decline is now underway.

XLE also in the process of breaking below the lower daily cycle band on Tuesday. A close below the lower daily cycle band will end the daily uptrend and begin a daily downtrend. This will also be an additional confirmation that the intermediate cycle decline has started.

With resistance clearly defined at 46 and multiple cycle signals now aligned to the downside, Energy has transitioned from consolidation into a confirmed bearish phase.