The Bullish Pattern of the Crude Oil is Good for the Energy Stocks

Crude Oil is showing an interesting technical pattern. The rally that has developed in the first half of September has now exceeded the 200 days moving average. Furthermore the WTI is now testing the not less important trendline that joins the 2014 top with the decreasing highs of the first half of this year. This movement is part of an accumulation that had begun form the lows of 2016 and gained strength on the progressively rising lows of the last 12 months.

Figure 1 – Crude Oil WTI – Weekly data 2014-2017. An important downtrending line is being tested. The long term oscillators are poised to reverse on the upside. Source: Tomaselli-Vivanti Analysis – Chur – CH

A look at the history is even more interesting. As we can see in the 20 years retrospective of figure 2, the sharp downtrend of 2014/2015 ended with a low at 26 dollars per barrel in February 2016. Since then, a gradual recovery has formed a series of rising lows that now assume the appearance of an inverse head-and-shoulders, a significant reversal pattern which shoulders are the lows of 2015 and 2016 and the head is the historical low of last year. The so called neckline, the resistance above which we would see a bullish signal, is now around 53$. In this case there would be the potential for a recovery towards the historical down-trending line in the 80s area.

Figure 2 – Crude Oil WTI – Monthly data 1998-2017. A head-and-shoulder pattern is likely to form. It contains bullish potential. Source: Tomaselli-Vivanti Analysis – Chur – CH

The energy related stocks are reacting accordingly. The chart in Figure 3 reproduces the last four years’ weekly data of the Energy Select Sector SPDR® Fund (XLE), an ETF quoted in the U.S. that tracks the performance of the Energy Select Sector Index. The energy stocks had been also dominated by a negative trend since 2014 and the attempt to reverse their course last year had failed in December 2016. Now, a new bottom is developing and the down-trending line of the first half 2017 ha been exceeded. A further important resistance is just above the 200 days moving average. Its test will be crucial.

Figure 3 – Energy Select Sector SPDR® Fund (XLE), weekly data since 2014. The energy stocks are alse reversing the negative trend of 2017. Source: Tomaselli-Vivanti Analysis – Chur – CH

Alberto VIVANTI – SAMT Vice President – Graubünden and Liechtenstein Chapter– alberto.vivanti@samt-org.ch

Disclaimer: the above article is for general information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.