XLE and XLI analysis

Quick summary: I still have an open contract for XLE expiring on March 6, strike price $55 – I exited half to take initial investment. XLI is my next prospect trading option, so I'll monitor its performance over 3 days.

Let's look at XLE and understand where we're at.

In the above, we can see that today opened above the $55 resistance we have been observing over the last few days and it closed above it as well. At the same time, we have a healthy RSI in the high 50s, which gives us a lot of breathing room and based on the pattern I've observed, we can expect to hit $56 this week. Looking back, I can see that February 17 was the toughest day of this contract, even though I was still well above the initial price I paid. Overall I can see an uptrend still taking place, but I would love to exit this contract once $56 is crossed, the reason being that my theta decay is currently 0.0594, representing a $5.94 per day, which will grow over the next few days.

Overall, I think XLE is in a somewhat healthy position, I say this because the big two were relatively high with $XOM being up by $3 from previous close and closing at $151.42. $CVX closed at $185.50 reporting $1 more than the previous close. I think what has kept XLE grounded today was $COP with a $-0.60 decrease, not a drastic change, but rather a guard rail for the sector.

Let's look at the next prospect XLI

I've highlighted today's performance for more clarity. Yesterday I defined the channel where support $172 and resistance $176. Today shows that not only did XLI open within the channel and below the resistance level, but it also closed within the channel. Additionally, we can see the RSI going to high 40s indicating that it is headed to an oversold position – this doesn't mean it will happen. XLI is interesting, while it has proved to be a somewhat steady asset, in the current channel, we can see that the resistance was previously reached around February 12 and then reverted back until February 20 where the resistance was tested again. If I were to look at the channel only, I would say that Friday's performance resulted in being a fake-out as today we saw it retreated back to the channel. However, we can monitor XLI over the next two days to understand if this channel breaks for good.

Now, it makes sense that XLI was down today, some of the holdings were down today and forced that pull back. XLI is different from XLE for the XLI holdings are evenly distributed whereas XLE has 3 top holdings that make up 42%.

Overall thoughts

Today was an interesting day, on the one hand we have XLE where the strike price is the new normal to observe, I'm looking for $56 or a goo break-even price for me to sell and close it. I'm still in the green on this, and it feels good, it's now a waiting to exit moment. On the other hand, we're looking at XLI, where the initial day was a bit on the red, and definitely makes me think it's probably not the right time to enter. Who knows, it may be a good entry point, but I won't rush it, I want to enter at the right time. No new technicals today, no new concepts, no new financial concepts – just observation. Tomorrow might be a bit of the same.