We are seeing some awesome swells and having a blast riding the waves over at the Precious Metals beaches aren’t we!? Sure there has been an expected consolidation lately but nothing in the big picture has changed there in my view. While I personally plan to stay at the PM beaches for quite a bit longer and ride those sick silver miner sets as silver itself looks ripe to begin the heart of its Intermediate (3), I also continue to scope out other beaches (or sectors) for ridable waves either now or in the future. One that was identified in Part 8 of the Upcoming 21st Stagflationary Depression series as having greater potential was the Energy sector which includes Oil, Gas, and Uranium. We’ll now take some time to look at each more closely. We’ll begin with the Oil and Gas sector and some of the the larger producers. Similar to the Surf Reports 4.1-3, we’ll break this report up into several parts and review charts for the components of the Energy Select Sector SPDR Fund, XLE. The fund currently has 23 holdings so we’ll split these up into several reports to see if we can identify some underlying trends. We’ll then do the same for the Uranium sector.
Hopefully by now you are gaining some understanding about Elliott Waves and perhaps picking up some surf lingo along the way as well. In surfing a “lull” is defined as calm between swells. After looking through many charts for Oil and Gas producers I believe that is just where we’re sitting at within the sector as you’ll soon see.
Oil, WTI Update
Before we look at the XLE and some of its components lets look at the latest count for oil and see if there is an intermediate bottom forming yet. My view is that there could possibly be one more lower low before (v) of C of Intermediate (4) is complete. A five wave impulsive move up over the April high would signal the beginning of Intermediate (5).
XLE
A very similar picture is seen in the XLE chart. I will note that Wave 4s tend to gravitate toward the levels reached in the prior lesser degree. This level would also coincide nicely with and validate the lower price channel trendline. Positive divergence is building over multiple timeframes so its just a matter of time until (4) finishes and (5) begins.
Exxon Mobil Corporation, XOM
XOM is the largest weighting of the XLE at a hefty 23.3%. Like XLE an oil itself, my view is that one more lower low can be seen to complete Intermediate (4). However positive divergence in the MACD has been building and so we could always see a flat or running flat for C of (4).
Chevron Corporation, CVX
CVX is a 19.4% weighing in the XLE and paints a similar picture with Intermediate (4) still likely in progress. I’m showing the deepest retrace I would expect to see for the Intermediate count to still remain impulsive (no overlap between waves (1) and (4)) which would coincide with the 61.8% Fib support.
EOG Resources Inc., EOG
EOG stands at a much lower weighting of 4.6% in the XLE and also has a very similar wave structure! Wow its like all these waves are showing the same structure! Nice to see similar trends forming!
ConocoPhillips, COP
COP makes up 4.5% of the XLE and appears closer to the bottom of Intermediate (4). Just a few more squiggles to complete (v) of C and I think the surf in in this will be “up”. In fact it may have already bottomed if it can begin moving impulsively higher above the highs made in April.
Schlumberger N.V., SLB
SLB is also working its way towards a lower low in Intermediate (4). The MACD is also forming bullish positive divergence on 4 hour chart and even on the daily so a reversal is coming. Intermediate (3) extended all the way to the 200% so we shouldn’t be surprised by higher extensions for (5) perhaps to the top of the price channel if the SLB bulls get carried away.
Marathon Petroleum Corp, MPC
MPC is just now beginning to build positive divergence on the MACD. I’ve drawn two potential price channels but think the larger Intermediate structure would be more complete with a deeper retrace for (4) towards the 50% level.
Pioneer Natural Resources, PXD
PXD is currently a 3.8% weighting of the XLE and moving up fast. This is perhaps because the bottom of Intermediate (4) is possibly in! Let’s zoom and see what we need to look for to add confidence to this view.
Zooming into the 144 minute chart I can count five waves up off the March low in the micro degree with a corrective pullback towards the 50% retrace. This coupled with positive divergence on the MACD are all good signs pointing to a start of Intermediate (5). A bullish move above the Fibonacci resistance level between the 61.8% and 78.6% level would confirm.
Summary and Observations
We have some very similar wave structures in the Oil and Gas sector! The sector is most certainly in a “lull” here as everything we looked at in this report has been consolidating in a corrective Intermediate wave (4) but is building positive divergence for an inevitable reversal to begin Intermediate (5). The only outlier was PXD which may confirm a bottom as discussed. The rest appear to have a little more work to do and low lows will likely depend on what happens to the underlying commodity. I’ve collected the wave (4) Fib supports and wave (5) targets for the tickers and summarized potential downside risk and upside return from current price levels. Although these are not as explosive as some of the precious metal miners we looked at in previous surf reports, these potential upside returns could improve as the Intermediate (4)s continue deeper. Also the respective wave (5)s could fill out in a much shorter timeframe so I am not ignoring the energy beach for a few good sets if I see them!
So that does it for this first Surf Report for the Energy beach. Next time we’ll look at a few more holdings in the XLE and will include linked updates to the charts we showed in this report. I hope you found this interesting and informative!
Until then…
Cheers and #EndTheFed
-Hypersonic78
Disclaimer: None of this is financial advice. Please do your own diligence. The views expressed here and other Surf Reports are my own. Only risk what you can afford to lose in these crazy markets. Know your timeframes, parameters, and risk tolerance.
Position Disclosure: I am currently not short or long any companies/assets covered in this report but am simply watching them for a possible low risk long entry.
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Another great work, thank you for that!