The oil service holders trust is in the middle of a triangle consolidation pattern and has been for over two months. Note the rising bottom of the triangle. This tells us that traders are setting higher and higher bottoms as buy points. Prices and the SMAs however, are in a tight range. Neither is giving a firm signal either way.
The gas exploration and production ETF has moved around in a 5 point range for the last month. Prices and the SMAs are in a tight range and aren't giving us a big signal one way or the other. The point with this chart is -- so far -- is hasn't moved any lower.
The XLEs have been in a back and forth range for the entire year. Again, this is a sign of consolidation. While there is no news moving the market higher yet (thanks to oil prices being at lows) prices in this sector are clearly stabilizing.
The energy sector is an important part of the economy and the market. All of the charts above indicate consolidation and the possible forming of a base. However, we won't know if this is a base of a consolidation before a move lower until prices move one way or the other.
3 comments:
"[W]e won't know if this is a base of a consolidation before a move lower until prices move one way or the other."
Behold! The power of technical analysis!
The scary thing about nat gas is that the combination of collapsing prices and the credit crunch have led to lots of drill rigs being shut down. And most of the recently developed gas in the US has come from what is called "hydrofracking tight shales". This type of gas well produces massively in its first year or so, then depletes rapidly.
With so many rigs being shut down, and recent wells not being replaced as they deplete, we could run into supply issues in a short period of time, if the nat gas price doesn't come back up.
marku:
Agreed, the whiplash on energy commodities will probably be a brutal one, on this cycle.
Blank Reg
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