Its been a few weeks so let’s take a look at some additional components of the Energy Select Sector SPDR Fund, XLE. I know many of you are interested to see what may be in store for the Uranium sector. That will be Surf Report 7 so I appreciate your patience. But first lets look just a few more holdings in the XLE to add greater certainty to where the Oil and Gas Sector may be headed from here. In Surf Report 6.1 we looked at Oil itself, the XLE, and XLE’s first 7 holdings. For this report we’ll do an update for the Natural Gas, a closer look at the XLE count and the next 7 components of the XLE which will give us a good view of over half the total holdings of the XLE ETF.
Before we dive in, I thought you’d enjoy this quote on surfing ocean waves. I also think it applies well to “riding” R. N. Elliott’s waves and investing/trading. One can also apply this to the waves we encounter in life…
“There are no bad waves, only bad decisions.”
― Andrew Pacholyk
Elliott Wave surfers must strive to understand the full wave structure as much as possible so that the underlying trends can be identified. Equally important is to identify areas of support and resistance and know how the assumed structure could possibly be invalidated. For example, suppose you observed a stock that has reversed downward following a big rally. It found some support and is now moving back up. But is this renewed price strength a B wave? Or is it the beginning of a Wave 3 or 5? Could it even be a wave 2 in a new larger degree downtrend? How will we know? We must decide what the highest probability structure is. We can do so by looking very closely at both smaller and larger degree structures and using Fibonacci retrace and extension levels to validate the underlying counts. The more careful we are assessing the wave counts, the better we become at identifying what kind of waves we are dealing with. Knowledge and understanding can be powerful and help us make better trading and investing decisions we are able to make.
That said lets look at Natural Gas and some more XLE components.
Natural Gas
I reviewed Natural Gas in Part 8 of the Upcoming 2st Century Stagflationary Depression back in October 2022. The structure was calling for a wave 2 retrace which has been very deep. Wave 2s can retrace 100% of wave 1. Despite declining back into the falling wedge, the breakout remains valid in terms of Elliott Wave. Traditional technical analysis pattern lines only serve as guidance in EW and are not a rule. The action in Natural gas has been corrective and much higher Primary 3 awaits looking years out.
Has Primary 3 started yet? Lets take a closer look and zoom in. There is enough structure for a complete 5 waves in C of Primary 2 but we still need confirmation with 5 waves up off the April low as shown by the green count. Also negative divergence seems to be building in the MACD so I believe there still remains risk of one more low.
XLE (update)
Since its been a couple months since Surf Report 6.1, lets zoom in for an update on XLE to see how Intermediate (4) is progressing. Looks like it is almost there with Minuette (v) of C underway. Of course if we saw a 5 impulsive wave rally above the wave (iv) high then we would need to revisit this count and assume Intermediate (5) has begun.
Phillips 66, PSX
The 8th largest holding in the XLE is PSX. This seems to have some work to do if Intermediate (4) is following a wave ABC corrective structure. So far I’m only counting three waves inside C of (4). As with many charts we reviewed in Surf Report 6.1, we are in the lull.
Valero Energy, VLO
Valero Energy has its headquarters in San Antonio in my home state of Texas. Like many other oil and gas charts we’ve reviewed and will review in this report, its completing a large Intermediate 5 wave structure from the April 2020 lows. Its price is a bit further along in its Intermediate (4). Price is currently in a Minuette (iv) with one more lower low to complete C of (4).
Occidental Petroleum, OXY
Occidental Petroleum has oil production in the United States, the Middle East, and Colombia. In may view Intermediate (4) might be done. Again we’ll need to see 5 waves up above the ~$65 level. So far we can see 2 waves in what would be a diagonal structure. Otherwise a lower C of (4) is certainly possible.
Williams Companies, WMB
Williams Companies is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing, and transportation of natural gas and natural gas liquids. With a widespread pipeline system of more than 33,000 miles, Williams is one of the largest domestic transporters of natural gas by volume.1 By my count, WMB has likely started Intermediate (5). Surfs up this one!
Hess Corp, HES
Hess Corp is of the largest gross operated deepwater producers in the Gulf of Mexico and also has offshore assets in Asia Pacific and South America. Intermediate (4) may already be done if the ABC correction is what’s called a running flat2 where C sits a bit higher than A. Again we need 5 waves up from the low made in C to confirm or there is potential for a deeper retrace in C of (4).
Kinder Morgan, KMI
Kinder Morgan is one of the largest energy infrastructure companies in North America and specializes in owning and controlling oil and gas pipelines and terminals. KMI owns an interest in or operates approximately 83,000 mi (134,000 km) of pipelines and 143 terminals. The verdict is still out as well on whether KMI has seen its Intermediate wave (4) low. So far there are 3 waves up off the May lows.
Baker Hughes, BKR
Baker Hughes operates in over 120 countries providing products and services for oil well drilling, formation evaluation, completion, production, and reservoir consulting. As far as its wave structure its well into Intermediate wave (5). Support stands at the wave 2 of (5) low price level I’ve marked in orange.
Summary
These lulls in XLE have made some progress. Several of the charts we reviewed have started an Intermediate (5) or are trying to confirm. As seen in the summary chart some have more upside potential based on Fibonacci extensions. For completeness I’ve included links to charts we’ve reviewed so you can see how they have progressed from Surf Report 6.1.
I will note that since Surf Report 6.1, COP is trying to make 5 waves up and may also confirm the start of Intermediate (5). Again if wanting to surf these oil and gas waves by taking long positions, the lowest risk entry is to wait for a confirmed low and larger 1-2 setup off that low with a stop just below Fib support.
I know a few have voiced their interest in the Uranium sector. I do not wish to cut the Oil and Gas sector short though. I do intend to publish a SR6.3 on XLE to show a more complete view of the sector but lets take a quick poll to see where the highest interests are for the next report…this poll will last 1 week.
As always, I hope you found this interesting and informative! I will try to get another report out in the next next few weeks or so. I’ve been super busy with my day job and making sure I leave enough time for family.
Until then…
Cheers and #EndTheFed
-Hypersonic78
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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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These reports take a lot of time / effort. If you enjoy them, coffee or KAG are greatly appreciated if you wish…
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https://finance.yahoo.com/news/heres-why-williams-companies-inc-134506351.html
https://www.thepatternsite.com/EWRunning.html
Fantastic work as always, thx a lot