$XLE Day 3

The 48 hours of analysis on $XLE before deciding to open a contract are up. Today's my third day writing about $XLE and monitoring its performance.

In the chart below, we'll discuss the key points we were looking for.

• The resistance from the highlighted channel is the new support. I know that it's only been 5 days of the $XLE closing above the $49.80, but it is consistent.
• Yesterday I mentioned the RSI inching closer to 70 as we observed a 64 mark yesterday, in today's chart, we see the overbought position.
• The volume was controlled by the buyers again with an estimate of 59M shares bought, while only about 12M trading volume for sellers.
• In my speculation yesterday I said that I expected the price to be high $51 to $52. My expectations were exceeded as $XLE nearly reached $53 with today's high of $52.96. I'm not gonna lie, I started experiencing FOMO again and almost opened a call contract. I didn't do it though, I decided to wait for today's analysis and closing price.

$XLE is an interesting stock to me, I don't think it's got high volatility, to me it's a steady and consistent stock, it doesn't divert much from its current price. Of course, this could change with any news that may impact it.

The verdict for me is, I will open a contract. While the RSI is above 70 now then it means recalibration is bound to happen. Although, it is the first day the 70 mark was crossed since January 29, which means that the RSI could remain high for a while or recalibrate briefly as we have seen in previous days (January 14-15, January 28-29).

Secondly, the diagonal attempt (I should cover this in the next few days) – shows us that there is a bullish trend, the higher lows continue to grow and so do the higher highs. In addition, we have seen that the buyers have been controlling the trading volume in the last 3 days.

Prep for tomorrow's contract

• Buy Call Option for $55 expiring on March 6

  • Current contract tonight is $1.02
  • Break-Even is $55.88

• Stop loss price will be 25%.

  • Contract price = $1.02 -25% = $0.76
  • $XLE price = $51.90

I'll be monitoring the theta decay, as I want to be mindful of it. At this moment, my contract will be "out of the money" since the price is at $52.81 that's $2.19 difference.

My emotions and thoughts on this.

I honestly feel a bit nervous about it, because I'm applying what I've learned from my gains and losses to an actual trade now. I've sat for three days just observing the behavior of the stock. Part of me feels like I need to go for it now, even if the RSI is high.

I have two main thoughts in my mind right now. The first one being, if this works, I'm going to continue to use this strategy, and evaluate the profit/loss percentage moving forward. This is a good thought, it excites me. The second thought is, if this doesn't work, then I'll be a bit bummed. I'll have to go back to the drawing board and test new methods but needing to learn them and if they cannot be applied to my previous wins/losses, then it may be more challenging. And I mean, I'll do it, I'm not scared of starting over, but it feels like I found a good angle. While I know that the market doesn't care about my feelings and my strategy, I want it to work. The silver-lining being that I am sticking to rules here and respecting them. This time I've set the stop loss ahead of time, which should minimize losses further from my last loss.