The energy stocks continue to rally as crude finds more buyers pushing the price to $55.91 and breaks from the base trading range established over the last three months. This is a positive short term for the price of crude and stocks followed suit jumping 2.4%. XLE cleared the $80.50 resistance on Tuesday as we discussed and today it moved above the $82.50 resistance. That sets up the sector to break from the trading range stared in early December. $88.85 is the target now if the move confirms on the upside. Relative strength has moved above the 60 mark and all is well for now. The weekly chart show the double bottom that is the trading range or base on the daily chart. As with any pattern breakout the confirmation of the move is key as well as the momentum into and following the break higher. For now the buyers are definitely in control of the sector.
SPDR Oil & Gas Exploration ETF (XOP) broke above the $54.45 resistance as well on the day and puts the $63.27 target into play. Market Vectors Oil Services ETF (OIH) cleared the $36.51 level and is moving higher as well. If it is in the energy sector odds are it has made a solid move on the upside near term. The question: how sustainable is the upside move relative crude oil prices. Those prices, hit their highest settlement prices of the year. A 12% gain over the last five session marks a solid move in the price of crude. The catalyst on Wednesday was the smaller than expected increase in crude supplies. Throw in a higher demand forecast from the International Energy Agency and the believers are out in full force on Wednesday. You ride the trend as long as it continues, but don’t over stay your welcome if what the speculation is forecasting doesn’t materialize.
The Russell 2000 index hit a new high today closing at 1275. This keeps the uptrend in play and the sector in a leadership role. Our near term target for IWM is $130 or roughly 2% higher from the close. Again, we will hold our positions until the trend gives us a reason not to do so.
Basic Material (XLB) broke above resistance as well at $49.75 with a target in place of $52.20 currently. The move in the commodities and optimism about the global outlook has brought some positive momentum back to the sector currently. Technically the breakout offers are short term opportunity.
The other nine sector of the S&P 500 index remain in consolidation patterns as they inch near the February and March highs. The rise over the last three weeks has been methodical by the indexes, and with earnings putting a positive spin at the outset of the announcements the buyers are willing to tiptoe back into the markets with caution. It remains a work in progress and we will continue to approach it methodically day by day.
Brazil (EWZ) cleared the resistance at $34.02 adding 2.5% on the day. The chart shows a double bottom pattern and it is working of a trend reversal short term. The bump higher in oil prices helps the outlook for the country as well.
Russia (RSX) remains on a move higher as well. It took a brief four day break and resumed with a 5% move higher today and closed back above the 200 DMA. This is another country that can attribute part of the move higher to the bump in oil prices.
The gold miners (GDX) made a move through the resistance level at $19.75 breaking from the consolidation pattern near the lows in March. The reversal on the day in gold helped, but the break from consolidation is worth tracking as well. This is yet another sector making a break from the consolidation patterns in the market sectors and sub-sectors.
As we end another day of trading the key is to put it all in perspective and determine where to keep stops and how to manage the risk of the current environment. We will take what the markets have to offer, but we will also protect against the downside risk. One day at a time, one trend at a time.