Since then, the price of oil has rallied as much as 10%. And the oil sector, as represented by the Energy Select Sector SPDR ETF (XLE) is up 10% as well – in ONE month.<\/p>\n
As I mentioned two weeks ago<\/a>, the oil stock rally has gotten a little too extended to the upside. It needs to either pause or pull back – or maybe some combination of the two – in order to relieve the overbought condition before the sector is ready to push even higher.<\/p>\n Well… for the past two weeks, the energy sector has paused. XLE was trading at $73 per share two weeks ago. It’s still hanging out right near that same level.<\/p>\n But the sector now looks vulnerable to a short-term decline. We just got a sell signal from the S&P Energy Sector Bullish Percent Index (BPENER). Look at this chart…<\/p>\n A bullish percent index measures the percentage of stocks in a sector that are trading with bullish technical patterns. It’s designed to measure overbought and oversold conditions. An index is overbought when it registers above 80 – meaning 80% of the stocks in the sector are trading with bullish patterns. An index is oversold when it drops below 30.<\/p>\n The red arrows on the chart point to times when BPENER rallied above 80 and then turned lower from overbought conditions. That action generates a BPENER sell signal. Usually, it’s a good idea to avoid owning energy stocks in this situation.<\/p>\n Here’s how those arrows coincide with the action in XLE…<\/p>\n Following the BPENER sell signal last October, XLE chopped around for a couple of months before marching higher again. The sell signal in January kicked off a significant decline.<\/p>\n There’s no way to know for sure what sort of action the most recent sell signal will trigger – a consolidation phase or a sharp decline. It’s a pretty good bet, though, that the immediate upside is limited. So, there’s no real urgency to jump into the energy sector right now.<\/p>\n Traders should give the new BPENER sell signal some time to play out before buying into oil stocks. We’ll likely have a chance to put money to work in the sector at somewhat lower prices in the weeks ahead.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n P.S. <\/strong>Tonight’s the night.<\/p>\n This past week, I’ve been telling you all about my one-night-only online training event, where I’ll reveal my breakthrough method<\/a> of finding winning trades in times of extreme market turbulence. It’s sure to be an invaluable tool as volatility ramps even higher from here.<\/p>\n![\"\"](\"https:\/\/jc-stable.s3.amazonaws.com\/ee-assets\/channels\/articles\/mm\/201805-mm\/20180509-mm-01.PNG\")
<\/p>\n![](\"https:\/\/www.jeffclarktrader.com\/wp-content\/uploads\/2018\/05\/jct-banner1805.png\")
<\/a><\/p>\n![\"\"](\"https:\/\/jc-stable.s3.amazonaws.com\/ee-assets\/channels\/articles\/mm\/201805-mm\/20180509-mm-02.PNG\")
<\/p>\n![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
<\/p>\n