Analysis $XLE Day 2

In yesterday's post I mentioned I'd be applying what I gathered from my wins/losses. Yesterday was the first day I looked at $XLE, and today I focused on monitoring it. In today's analysis, I'm going to be looking at the horizontal channel, RSI, volume, and lastly a diagonal as well.

To begin, today was a positive day for $XLE, we saw it cross a higher high from January 29, where we observed a $50.73, today the high was $50.78 – a small change, yes, but significant, it's telling us a lot about it. I think we'll start to see a new channel be defined in the next few days. The trading volume today was controlled by the buyers with an estimate of ~ 53M, while the sellers only had a 25M trading volume, that is about 50% difference.

Looking at the chart below, the same defined channel we set up yesterday. From this, we can see that the resistance is starting to become the new support, at the same time, the RSI is inching closer to the 70 mark – currently sitting at 64.

At this point, this is pushing me to want to open a contract for a call option. I'll be making a decision tomorrow after its behavior. Here's what I'll be looking for:

• Is the resistance the newly defined support? - This will be answered tomorrow throughout the day and closing price.
• If the resistance (now becoming the new support) is tested but the RSI remains around 40-50 mark, then I'll open a contract for the next day.

Let's look at two diagonals in the last two days.

I know this set up/drawing in chart is possibly a poor attempt. It's fine though, all I'm trying to convey here is the higher lows observed on January 30, then on February 1 (yesterday), we see a small drop, but see that trend of higher lows and higher highs come back today. It seems to me that the trading volume was greater today than it was yesterday. We can see this through the bars present in that slight drop.

Here's what I expect for tomorrow: I expect a drop during some hours of the day after slightly touching higher $51 to $52, when this happens, I expect the RSI to reach the 70 mark again, but expect it to drop later in the day. I think $XLE will close in the $50s tomorrow with a mid RSI. If this is the case, and the trading volume is high, then I'll open a call option contract.

Something I'm noticing, a pattern that may be unusual in the stock market is the time lapse of price change in the stock. I see that there is roughly 11 days for a ~$2 increase based on its current trend. From January 13 - January 23, we see it go from $47 to $49 in this time window. I'm seeing something similar from January 23 - February 3, where it's gone from $49 to almost $52. If this is true, and all other factors point to a potential buy tomorrow, then I will say that we can expect the price to reach $54 in about 11 days – February 13.

Final Thoughts

Analyzing a stock for a minimum of two live days + historical, is something I'll need to start getting used to. Again, I could really enter at any point if I don't care about losses. Though as I've been mentioning over and over, the goal is to minimize losses and maximize profits; this will only be achieved through discipline and patience. I'm excited to see tomorrow's behavior, and I'll definitely be pumped if my predictions start to come to reality.