Thoughts On The Energy Sector

A reader asked me today what I thought of the energy sector and if I would look at it using Stage Analysis.  I have been noticing some energy stocks appearing on my stock scans, and that hasn’t happened in quite a long time so that’s a positive.  But here’s what I’m not seeing that hasn’t made me want to load up on energy stocks yet:

  1. Large number of energy stocks across the sector breaking out to new highs on big increases in volume
  2. Energy stocks outperforming the S&P 500 and other sectors
  3. Crude oil in an uptrend
  4. Commodities as a group in an uptrend (I tend to use the GCC ETF to view that)

Here’s a longer term chart of XLE.  A couple of things to note on this chart.  I’d rather see a nice long base here to launch into a new bull market, but all we have so far is a bounce higher from the 2016 bottom.  I could see energy stocks basing for a while longer here and digesting the previous bear market.  I want to see XLE outperforming the $SPX on the middle section of the chart too, and that’s clearly not the case.  If you look at semiconductors or biotech (SMH or XBI) you’ll see the exact opposite of what you see here and that’s why I like those sectors right now.

I actually did recently trade one energy stock WTI because I liked the chart but I didn’t trade it as a sustainable uptrend.  Maybe I’ll be wrong and energy stocks have bottomed here but I don’t see that yet in the charts.  On this chart of WTI though you can see how we have a nice Stage 1 base that it exploded higher off from on massive volume.  But notice how it did the same thing in late 2016 only to turn out to be a fake rally that failed.  I wouldn’t be surprised if the same thing happens here unless we see more strength across the sector.

I see the same thing in energy in other commodity sectors like gold stocks.  A few stocks breaking out higher but that tends to be the exception more than the rule.  That was why I didn’t think the August to September rally in gold was going to lead to a new rally as well, I saw a lot of gold stocks acting terribly when they should have been gearing up for a big move.

Checkout my new Stage Analysis Screening Tool at: http://screener.nextbigtrade.com

Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

Using The Stage Analysis Screener To Trade Indexes

In this video I respond to a reader question about using the Stage Analysis Screener to trade stock market indexes.  In particular the reader was interested in the TSX, so I focus on that index.  The Stage Analysis Screener is very useful for understanding the trend of a market, breadth of an index, and finding leadership sectors and leading stocks.

Tech Leads The Market And Not Chasing Overextended Stocks

Happy Memorial Day to all NBT readers!

In this video I discuss the weak breadth that has occurred across the stock market since early March 2017.  Weak breadth means that less stocks are participating in a market rally, which means that it’s harder to find a stock that’s outperforming the market.  The market so far in 2017 has been led by large cap tech stocks and by the semiconductor industry groups that have been in strong Stage 2 uptrends since the middle of 2016.

In the second part of the video I go over the importance of not chasing overextended stocks that are far away from the 30-week moving average.  This can lead to losses and occurs because traders lack discipline to wait for a better buy point after the stock has consolidated for a while.

Interview With Palisade Radio On Uranium, Stage Analysis, Trend Following And Gold

At the end of last week I had a great opportunity to interview with Collin Kettell of Palisade Radio.  In the interview we discussed a wide range of topics including:

  • The Stage 2 breakout in uranium that occurred back in December 2016
  • How bull markets typically have an explosive start and finish
  • How I use Stage Analysis to identify and trade bull markets
  • The strengths and weaknesses of trend following systems
  • How the bull market in gold from 2016 started to fail at the end of the year
  • Other new bull markets besides uranium I’m looking at currently

Collin has done a lot of great interviews with other experts in the uranium space that I would highly recommend checking out at palisaderadio.com.