“Producing” Gains:

Not too long ago we took a look at the XOP and pondered that there was a very good chance the group was ready for a run. This is what I believed could happen and how it was portrayed in our 6/27 Energy Note. The week ending 6/30 registered a bullish engulfing candle rising more than 5% and last week added more than 5% as well (the 2 weeks in between incredibly recorded WEEKLY doji candles). Those types of candles are bullish at tops and bottoms as they indicate indecision and are often adept at signaling changes in the prevailing direction. Of course, for energy that has been lower as the XLE is the worst-performing major S&P sector out of 11 on a YTD basis, down almost 2%. What has reinforced my belief that energy could be headed even higher from here is last week broke above a bullish 3-week tight pattern (one of William O’Neill’s favorites). Last week broke above the prior 3 WEEKLY CLOSES which all CLOSED within just 35. of each other. That type of coiling action can lead to explosive moves and this could be just the beginning, and we know the best instruments offer add-on buy points on the way UP (XOP buyable here after the 3-week tight breakout following the symmetrical triangle breakout we spoke of in our 6/27 Energy Note above 128). One thing that is desperately needed is for individual names in the exploration and production group to start sporting solid bases, something not lacking in the solid equipment arena.

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