AN ANALYSIS USING FIBONACCI IMPULSE STRATEGIES.
Since breaking below our long term "89" line more than a year ago, the XLE made a strong move above the line to record a Weekly closing price of 58.99, within striking distance of weekly Fibonacci Cluster Resistance of 62.27. (See Weekly chart)
A single close above the weekly line is not an official trend change. We require three (3) consecutive weekly closes above the line for a trend change, because very often on the first thrust above the weekly "89" line, the market will return to test the line. This seems likely with a Bearish Squat on our intra day 89 minute and 135 minute charts.
Therefore, we look for a pullback, where scale in longs should be considered at 57.00, 56.19 and 55.42. (See 135 min charts)
The surge in the XLE from the March low to this weeks high has been 58.4%, in lock step with the general stock market advance of 59.8% as measured by the OEX. Our call for a pullback in stocks fits with a modest pullback in the XLE.
The bubble in energy stocks is best exemplified by the refiners (OIH), which saw the market go from 38.64 in Sept. 2001 to 228.07 in July 2008, nearly a 500% increase, then collapse under massive liquidation to 60.96% by Dec. 2008. An 11 month rally has brought the market back to 128.64 as of this past Friday to a 112.5% gain from the low.
Major Fibonacci Cluster Resistance exists above the market at 144.51 basis the Monthly chart, where shorts should be considered. Long Calls one (1) strike above can be used for protection going out 60/90 days. However, this trade is not likely for several months, if at all, but keep an eye on the 144-145 levels. (See Monthly chart)
In the near term, we like the long side on a pullback to Fibonacci Cluster Support basis the 135 (See chart) and 89 minute charts at 123.05, 121.31, 119.20. Unless the reader is particularly bullish on the fundamentals, longer term, these levels are "swing trading" level holds for up to a week. If fills are taken, follow the Commentary for targets, which may be limited by our weekly publication dates.
For a desciption of Bernie's method CLICK HERE.
Bernie Mitchell was not always a market guru, nor did he expect to be one. The calling came in 1974 when Bernie found himself paying more attention to the stock market than his 20 year job on Madison Avenue. Committing himself to a new direction he began trading gold futures. Ironically, between 1974 and 1979 all he could do was turn gold into lead. Not exactly the kind of market wizardry he was hoping for. As all good gurus, Bernie immersed himself in market knowledge, learning from the other gurus of the day, Williams, Wilder, Bernstein, but it was really in his own laboratory the discovery was to be made.
In 1981 Bernie developed the POKE system for the commodities markets. He modified the same system for day trading in 1994 focusing on the S&P 500 Futures and then for individual stocks in 1996. In 2001, he created Fibonacci Cluster Software, a totally unique way of decoding Support and Resistance levels. Fibonacci Clusters can help any trading system be a better trading system. Today, Bernie has emerged as a leader in market technologies, being published in Stock, Futures & Options Magazine Investor Flash, and Chartpoint Magazine. Since 1997 Bernie has published Fibonacci Impulse Strategies Market Commentary, a market letter that goes out about 20 times a month. Bernie has successfully trained over 800 traders which what has now become the Fibonacci Impulse Strategies.