OIL SECTOR HITS PARABOLIC SELL STOP WHICH HINTS THAT ENERGY HAS HIT SHORT-TERM TOP
ENERGY SELECT SPDR HITS PARABOLIC SELL POINT... Since I wrote about applying the parabolic stopout points to the oil sector last week, I thought it only fair to point out that each of the energy indexes I follow are hitting their parabolic sell stops today for the first time in several weeks. Chart 1 shows the Energy Select Sector SPDR issuing its first profit-taking signal in more than a month. Its 14-day RSI line is also starting to slip under 70. At the very least, this would seem to suggest that the energy sector may be entering a short-term correction or consolidation phase to work off its overbought condition. The RSI line may decline to 50 before stabilizing.
Chart 1
OIL SERVICE HOLDERS FALL IN RISING VOLUME... Oil Service stocks are also hitting their parabolic sell point this morning. The short-term profit-taking signal in the Oil Service Holders looks more convincing than the XLE. That's because the RSI line has clearly fallen to the lowest level in more than a month which shows loss of upside momentum. And, the red volume bars for the last three days show heavier selling in the oil service group. That's a warning of a short-term top.
Chart 2
HOURLY CHART SHOWS HEAVY SELLING ... The hourly bar chart of the OIH shows today's heavy selling more clearly. Today's red bars are the heaviest in nearly three weeks. Considering how overbought the oil service group is, and given today's parabolic "sell signal", it looks like it's time to either take some short-term profits or postpone any further buying in the energy patch for the time being. If energy stocks are indeed starting to weaken, which hints at lower crude oil prices, that may give some needed help to the rest of the stock market.
Chart 3
