Crude oil and the Energy Sector (and select energy stocks) are still tough to fade here. While we are getting closer to a top, there could still be one more push higher in days ahead.
WTI Crude Oil looks to have carved out a picture-perfect 5 wave advance into early March highs (impulsive). As well, the pullback thus far does not look structurally like the start of a broader decline.
While a decline in Crude Oil (and the Energy Sector – $XLE $XOP) is overdue here given a number of factors including cycles, sentiment and near-term overbought conditions, we need to see further deterioration to think a decline is here.
The specific act of overlapping the prior wave on Wednesday suggests a move back to new highs is more likely in the short run BEFORE any larger pullback into June. So while the setup is getting closer to a more meaningful pullback, it is right to favor the Energy sector for a little bit longer. A move over 65.50 for crude oil should allow for movement up to the low 70s before a stallout.
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Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.