Today’s market is in a straight to the point kind of mood, so I’ll get right to it. XLE is currently trading at 81.24. I expect it to trade down to 57.60, the October 2021 POC, by November of this year. That would be a 29% gain if you shorted XLE from here. Let’s take a look as to why I expect that outcome.
After its initial thrust lower in June/July, XLE saw a six week retracement, finding resistance at the June POC of 85.85. This appears to be a simple bear flag coming off the July low. As you can see XLE peaked briefly above the top Keltner, and yesterday began to selloff back underneath the top Keltner band. This is a great short entry, and caught my eye.
So why do I expect a 30% selloff in XLE over the next few months? One of the tools I use to forecast how CL might operate is to look back at how GC acted twenty months prior. This gives us a good echo for what direction to expect in CL now. The time period to look at for GC is August 2020 through March 2021. We should be expecting further weakness in CL for the next two to three months.
The June/July decline found support at the January POC of 65.15. I would expect this level to get taken out. If that occurs, there is a large air gap down to the next POC cluster which starts at 57.60.