MY JOURNAL FOR FRIDAY – DECEMBER 9, 2022
NEWS, BREAKOUTS, MOMENTUM PLAYS & BOTTOMS
The Canadian Technician
Energy Names Implode
Greg Schnell | December 09, 2022 at 06:17 PM
Energy stocks got rocked this week. Inventory data doesn’t seem to matter. Russia doesn’t seem to matter. For me, the charts have been weak for a while, but they got hammered this week. It may also be a long term change in trend. We don’t make recommendations for your portfolio, we do analysis of price movements. You’ll have to make your own decisions.
XOP was down on the week but more importantly, the indicators are all breaking down.
- The SCTR is a relative ranking of how strong the price action is compared to other ETF’s. It is currently one of the worst charts for price price action as it is only outperforming 2.9% of the ETF’s.
- Relative strength compared to the $SPX has been declining in a straight line for 5 weeks.
- Price has fallen below the 20, 50 and 200 DMA. It looks awful. Eventually there will be a bottom but none of the moving averages have worked so far.
- Volume is above average on most selling days.
- PPO – a momentum indicator is pointing straight down at this point.
XOP Daily – longer view
When we zoom out on this chart, a few more important things show up.
- This is the lowest SCTR level of the year. Actually, this is the lowest rating since oil started to rally in 2020!
- The 2022 relative strength up trend is firmly broken.
- Looking at the price chart, there is a trend line that may provide potential support. More on that later.
- The PPO has been coiling for the last 6 months, and now it is breaking down. This breakdown just started, so it would be very early to start betting on upside here.
When we look at the weekly chart, this looks like a long-term transition point.
Compare point 1 to point 3. Notice most of the indicators failing in a similar manner. The full stochastic has a different look when comparing, but it is breaking down. Point 2 was when everything got bullish.
There is never an exit sign at the top, but there is an exit on a chart. Emotionally it’s hard to sell winners when the ‘fundamentals’ look bullish. But that is why the chart made it to a high point. Investors are sniffing this out as changing conditions.
Clients at OspreyStrategic were cautioned on energy for 5 weeks. It has been working lower, but this week was a floor drain for the energy bathtub. For the broader market, clients have been on hold for two weeks before the big move down, protecting profits. If you are not aware of the PLUMB system, and would like more information, try a one-month subscription for $7. It can really help protect profits in a timely manner!
Greg Schnell, CMT, MFTA
Welcome to Osprey Strategic
Nearly a Decade of Experience in the Financial Markets
Greg Schnell, CMT, MFTA, is a Senior Technical Analyst at StockCharts.com specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and recent winner of the CSTA’s Technical Analyst of the Year. He is an active member of both the CMT Association and the International Federation of Technical Analysts.
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BREAKOUTS, MOMENTUM PLAYS, & BOTTOMS
ENGH.TO – Enghouse Systems Ltd.
IAG.TO – Industrial-Alliance Life Insurance Co.
IVN.TO – Ivanhoe Mines Ltd.
LIF.TO – Labrador Iron Ore Royalty Corp.
MDI.TO – Major Drilling Group Intl, Inc.
TSU.TO – Trisura Group Ltd.
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