XLE

[Pascal]

With the actual weakness in oil, XLE could again become a good short idea.
We can see that XLE fell back below its 5MA. It is still in an small uptrend, but I suspect that it could be weaker in the next days.

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Note that the statistics are better if we short a bounce to the 5MA than if we short a bounce 1% above the 5MA. The reason for this is simple: the 5MA has been a good guide for this instrument and a bounce 1% above the 5MA has occurred mostly in uptrends. The strategy therefore would be to wait and see whether XLE bounces above its 5MA. If it does, then the best shorts are on a break below the 5MA or on a jump to the top of the envelope.

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You might also use ERX as an instrument.

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[Pascal]

XLE gapped down today, which rendered the trade impossible to execute with good return probability. We can indeed see that XLE is now about back to its opening price.

What is however interesting is to see that XLE is bouncing while Oil's EV pattern is still very negative. This means that there is probably an XLE shorting opportunity here - probably tomorrow.

The reason why XLE is up is simply because the S&P is up, pulling XLE up with it. But the 20DMF on the S&P is not that positive while the CTick is very positive. This also means a shorting opportunity: algos are trading a Republican victory.

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