Energy at a Decision Point

The chart below of (NYSE: XLE), SPDRs Energy ETF shows the importance of the $54.25 level for the sector ETF. There is a convergence of trendlines and support at this level acting as a key level to hold for the sector. Friday the level was broken intraday but managed to rally back at the close. I would watch this level to hold and bounce back into the trading range or break lower towards the next level of support near $51.90.

The strategy to play this move is purely technical in nature and the entry, exit and target should be defined accordingly. Since this is a day chart I would use intraday charts for the entry point and weekly charts to confirm the risk of any trade resulting from the directional move.

There are plenty of opportunities similar to this resulting from last weeks selling. Scan the sectors for the opportunities, put them on a watch list to determine how to trade, and them put them into play based on your strategy with defined entry, exit and target.

Be cautious this week as the volatility is likely to continue until a trend is defined.