Mapping the Market: US energy shares could see another leg higher
XLE•Downside risk if trendline fails
However, the SPNY is still in a precarious position. If it breaks back below the trendline that forms the top of the pennant, it could head back down to the 800 area.
What the chart shows:
- Bull pennant pattern formed after sharp rally in energy shares
- Measured-move target sits at 1,207, roughly 35% above current levels
- A break below the pennant's trendline could send the index back toward 800
Measured-move target points to 1,207
Technical analysts usually estimate that the break higher should be about the same size as the initial gains that preceded the pennant-shaped consolidation. In the case of the SPNY, the "measured move," as it is called, would target the 1,207 area, about a 35% move from current price levels.
So far, the SPNY has completed the consolidation phase and attempted to break higher, though the move up initially fizzled as the Relative Strength Index – a measure of price momentum — indicated the market was overbought. Now, it is testing the top of the pennant from above. If that holds as support – a place where buyers step in – then the rally phase can begin. Initial resistance in that move would come at the 940 level, followed by the high of 976.91, which the index struck on March 30, according to data supplied by LSEG.
US energy shares form a bull pennant
July 29 (Reuters) - U.S. energy shares struck new highs this year as oil prices surged during the Iran war, then pulled back as peace hopes emerged in May and June. Now technical analysis suggests another surge could be on the way.
