New Contract Observation

Let me start by saying why I like ETFs – they're low risk in my opinion, and based on historical analysis that I performed for XLE yesterday, it tells me that it is good for long term investment. Secondly, a lot of the times the ETFs will be more affordable than one single stock that forms that sector. And lastly, it opens up my knowledge and horizons in a packaged manner. I say the last part because as mentioned before, the more my trading capital grows, the more I can choose to diversify it and not randomly, I can choose to have different option contracts within the sector and the entire sector (ETF) itself.

So, I found this resource for ETF list. Through this, I can explore various ETF options based on the sectors available, I can sort through this based on what's strong in the current times and go based off of that, or I can choose something I'm interested in and decide whether it's a good investment or not.

As there are only 10 trading days left for my $XLE remaining contract (remember, I took half out to get my initial investment), I need to start looking about what's next. Prior to starting my XLE, I observed it for a few days, I watched its behaviors through the days after performing a 20 and 14 days analysis. I intend to do the same again before entering my next one. I've decided I'll look at XLI, which falls under Industrials.

In the past, I considered Caterpillar as a potential option trade, but it was and is on the more expensive side for risk management for me at this point. Could I afford it? yes, but I don't want to blow out my money like I've done in the past. My intent right now is to develop strategies that work for me and with that comes acknowledging that I may lose money as well. The key here for me is - "how much am I willing to lose?". With that said, and like I said earlier, ETF gives me the ability to invest into the sector that caterpillar is part of, except for less. I'm a huge fan to be honest. So, Caterpillar is part of XLI, which gives me that confident stride in a way as I've known caterpillar has been performing decently for a while now. Without further ado, let's look at XLI.

Historical XLI

In the above, we have 25 years of data, where we can easily observe how much this industry has continuously grown. Similar to XLE, it has been consistent and steady rather than explosive, which I like. Of course, we have to be mindful of what has historically affected its trend, and the major hit we can see is 2020, during the global pandemic. Other than that, it is evident that today, XLI is at the highest it's ever been and we can then go micro and understand its behavior over the last month.

As shown in the above, we have one month worth of XLI data. I've gone back to early February to define a previous channel in search of what I identified in my previous wins analysis. Now, I've found the same for XLI, where we see the resistance was tested and the RSI remained 50-60 range before going up to $172 from $168. This can now set a picture for us and help us define a new channel for the most recent days and how PCE affected its price on February 20, 2026.

From February 6 - February 20, we can define a new channel where the support is $172 and the resistance is $176. During this time, we can see that the price of XLI has been steady and has closed within the channel, giving me that sense of confidence for investing in it. We can observe that from February 6 - February 11, the RSI remained in an overbought position. Nevertheless, when RSI cooled down, the support wasn't broken; this is something I also observed in previous wins. Let's fast forward to February 20, 2026 when PCE was reported. At the beginning of the day we see the resistance was tested, and it even closed above it. We can see that the RSI remained in the 60 level, which is a good indicator. So while PCE was reported higher (signifying that inflation wasn't cooling down) it didn't turn investors away. Given that in the past I've seen this behavior, I expect it to go into an overbought position in this coming week at some point and then we'll see that retreat that I've been observing constantly. During this time, I will go in because remember "the market pays you for entering well".

So, I've decided what my next option trade will be. I will analyze it for the next 2-3 days depending on how long it takes for that overbought position to take place and the retreat is observed.

Final thoughts

I'm excited for a new contract, even though it feels a lot like XLE; knowing that it worked for me makes me feel confident. Knowing that I've studied it and not heavy hours of analyzing it, but rather finding a common pattern is opening a new door for me. I won't set a stop loss price until my next 2-3 days of observation, because regardless of how confident I feel with this, I still need to be mindful about minimizing my losses. I didn't expect to fall in love with ETFs, but they're so steady it's hard to not obsess over them, plus it's like you get invited to the party for the big guys that make part of it. Tomorrow is Monday and I am excited for it, I'll be looking at XLE as I still have money against it, so I must monitor it to see if I take profit or continue staying in it. At the same time, I'll be tracking XLI, where the support is $172 and the resistance $176, which has now been tested.