This Sector’s Three-Year Rally Is Vulnerable to a Fall

[Trading With Larry Benedict]( This Sector’s Three-Year Rally Is Vulnerable to a Fall By Larry Benedict, editor, Trading With Larry Benedict Just over three years ago, the VanEck Oil Services ETF (OIH) was trading at all-time lows… However, as the oil price steadily recovered from its pandemic low, OIH rallied. From March 2020 to its January 2023 high, OIH surged a massive 410%. When [we checked in on OIH]( just after that big run (red arrow in the chart below), the ETF looked to be setting itself up for another run higher. But momentum dried up, and OIH instead rolled over and fell. It bottomed out in late May. So with OIH again rallying and trading close to its January high, today I want to see what’s coming next… Recommended Link [Elon Musk’s Multi-Trillion Dollar Gold Rush]( [image]( A new gold rush is brewing in San Francisco courtesy of Elon Musk but 99% of Americans will miss it because of this. [Learn all about it here.]( -- Stuck in a Sideways Pattern On the chart below, you can see OIH’s big rally from late September into November last year. After a pullback, OIH then rallied from December till its peak on January 18… VanEck Oil Services ETF (OIH) [Image] Source: eSignal When we looked at OIH in January, OIH was building short-term support. The Relative Strength Index (RSI) had tested and held its support level multiple times too. Yet for OIH to rally from there, both of these support levels needed to hold. The RSI also had to stay in the upper half of its range… However, the RSI fell into its lower range, where it stayed right through June. That strong decline in buying momentum saw OIH fall heavily too. You can see how sharp that sell-off became by the steep angle of the 10-day Moving Average (MA, red line) as it crossed below the 50-day MA (blue line). Adding to the bearish sentiment, both MAs also tracked lower. OIH bottomed out along with a converging pattern (red lines) between the RSI and OIH stock price – a common reversal pattern. However, after an initial bounce, OIH’s rally stalled. Although in its upper range, the RSI became stuck in a sideways pattern (orange circle) as it regularly tested support (green line). Take another look: VanEck Oil Services ETF (OIH) [Image] Source: eSignal In late June, the RSI eventually broke higher in its upper range. With that, its recent rally got underway. It was a similar pattern with our two MAs. After crossing above the 50-day MA, the 10-day MA initially struggled. However, the 10-day MA then accelerated above the 50-day MA as buying momentum (RSI) started to return. Yet that surge pushed the RSI into overbought territory (upper grey dashed line). OIH’s rally is coming under pressure. So what am I expecting 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. Emerging Down Move The RSI recently made an inverse ‘V’ (right red circle). So what happens next with the RSI will be key… If the RSI continues to track lower, then we can expect OIH to fall. The RSI tracking back toward support could see OIH trading back around $310. However, it is still early days with this emerging down move. If the RSI tracks sideways – as it did when it went into overbought territory (left red circle) back in October/November last year – then it could take longer for OIH’s rally to reverse. The other thing I’ll keep a close watch on is our two MAs… As I mentioned, the 10-day MA has recently been accelerating above the 50-day MA. For any down move to gain traction, we’ll need to see the 10-day MA roll over and track back toward the 50-day MA. Regards, Larry Benedict Editor, Trading With Larry Benedict Mailbag Are there any stocks or sectors you’d like featured in a future essay? Write us at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [The Real Reason They Murdered JFK?]( Some people believe JFK was murdered because of his executive order 11110 that would have reduced the power of the Federal Reserve. Regardless if that’s true or not… The Fed is now involved in a new controversy that could have drastic consequences for the US dollar. [Click here to see the details]( because if you wait until July 26, it could be too late…. And you could end up holding a bunch of worthless dollars. [Click here to get all the details before it’s too late.]( [image]( [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. 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