Oil drillers have had little to smile about over the past few years. Is that trend about to change? A pattern is in play that highlights a counter-trend rally could be near.
Below looks at the XOP—S&P 500 ratio over the past couple of years.
The ratio could be creating a double bottom at line (1), near the apex of a potential bullish ascending triangle at (2), as momentum is oversold and may be creating higher lows at (3).
Below looks at ETF XOP.
Since its 2014 high, XOP has declined by nearly 65%. If XOP can breakout above resistance of the falling wedge pattern, it could become attractive to the bulls and create a counter-trend rally.
If XOP breaks below support of the falling wedge, such a move would suggest that the down trend remains in play. We like the looks of this pattern on a risk-reward basis.