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Energy ETF Is Trying to Turn Higher

AMEX:XLE   SELECT SECTOR SPDR TRUST
Energy stocks were some of the biggest losers of coronavirus. Not only did petroleum demand fall off a cliff in March and April. They’ve also faced a big institutional shift toward ESG investing (electric vehicles and solar energy).

But few things last forever in the stock market. The fundamental backdrop for energy has improved as travel and the economy rebounds. (Air and rail traffic have both rebounded to their highest levels of the pandemic, and jobless claims have dropped to their lowest level.)

This potential turn could be playing out in the SPDR Energy ETF , which holds big names like Chevron and Exxon Mobil .

XLE had a giant spurt higher in June amid optimism about the economy reopening. It then calmed down and has been consolidating since. A few patterns suggest a turn may be coming soon.

First, XLE held the mid-May low around $34.30. If the downtrend were going to continue, that level had to give way. But it didn’t.

Second, the moving averages have stopped falling. XLE’s 100-day simple moving average ( SMA ) is now rising. Prices are also pushing up against the 50-day SMA . A breakout through here could get some more attention.

Third, prices are squeezing as volatility declines. XLE’s Bollinger Bandwidth is back to the lowest level since the crisis began. That can also indicate direction is changing.

This chart has a lot of potential but no clear signal yet. Traders may be looking for another close above the 50-day SMA for confirmation.

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