Why We Must Keep a Close Eye on Oil

[Trading With Larry Benedict]( Why We Must Keep a Close Eye on Oil By Larry Benedict, editor, Trading With Larry Benedict While most sectors were tanking at the start of 2022, crude oil went on a bullish tear. A rapid rise in oil prices saw the Energy Select Sector SPDR Fund (XLE) gain 70% in just six months. This added more pressure to runaway inflation. However, as buying momentum evaporated in early June, XLE strongly reversed. By mid-July, XLE had lost almost one-third of its value. On [September 6]( (red arrow on the chart below), XLE’s selling pressure had abated, allowing it to form a base. After that, XLE began retracing after a two-month bull run – which had seen it top out at a lower high. The price of oil has continued to swing. So today, we’ll see what’s in store for this volatile commodity. 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[>> Simply click here to get all the details.]( -- Strong Reversals XLE’s huge bull run kicked off in early January, with the 10-day moving average (MA – red line) breaking above the 50-day MA (blue line)… Take a look at the chart… Energy Select Sector SPDR Fund (XLE) [Image] Source: eSignal But after peaking at ‘A,’ XLE tumbled as the Relative Strength Index (RSI) reversed strongly from overbought territory (upper grey dashed line). As the RSI crashed straight down through support (green line) into the lower half of its range, XLE continued its fall. And the 10-day MA bearishly crossed back below the 50-day MA at almost right angles. Only when the RSI fell into oversold territory (lower grey dashed line) – and gradually started tracking higher – did XLE find a base. Eventually, the divergence (red lines) between the RSI (higher lows) and XLE (lower lows) swung momentum behind the stock price and caused XLE to grind higher. [New Battery up to 94% Cheaper Than a Tesla Battery]( Once the RSI gained traction in the upper half of its band, XLE continued its rally. And the 10-day MA broke back above the 50-day MA, adding positive sentiment. But then, the RSI reached overbought territory again and reversed sharply. This saw XLE make a lower high at ‘B.’ Take another look… Energy Select Sector SPDR Fund (XLE) [Image] Source: eSignal From there, the RSI tested and held support throughout the first half of September (red circle). But after dwindling momentum saw the RSI and XLE track lower again, the two MAs crossed back the other way. Now, the RSI formed a ‘V’ from oversold territory and recently broke back into the upper half of its range. Meaning, things are looking promising again. So what can we expect from here? Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. A Prolonged Rally? What happens with the RSI around this level is key. If the RSI gains traction in the upper half of its band, then this up move will continue to gain momentum. The longer the RSI can remain in this upper range, the more prolonged this rally could be. But I’ll also be closely watching the RSI if it tracks into overbought territory again. If the RSI forms an inverse ‘V’ from this territory – and reverses at a lower price level than ‘B’ – then that’ll put a cap on any move higher. We would likely see XLE roll over and continue to trend lower. However, a reversal from the RSI – back to support or lower – could provide nimble traders with the chance for a short trade. Regards, Larry Benedict Editor, Trading With Larry Benedict Reader Mailbag In today’s mailbag, a new [One Ticker Trader]( member starts her trading journey… I’m new and have no experience in investing with stocks, let alone with options. However, I watched your event on September 8 and was glued to the screen. I was so impressed by your accomplishments as a trader and as a hedge fund manager – not to mention your good looks and soft-spoken voice. I’m convinced I can try your strategy and learn more about the industry. Rest assured, I’ll make you proud of me. I have limited knowledge of computers, but your instructions are so clear and easy to navigate my way into. I’m crossing my fingers. – Celia G. Thank you as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [TODAY: ‘A Severe Financial Crisis Is Underway’]( The next big threat to America isn't inflation, recession, or even another market crash. It's a crisis that could devastate millions of Americans' retirements. 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