IT’S TIME TO BET AGAINST BIG OIL
The bullish percent index for the energy sector (BPENER) triggered a sell signal on Monday.
A sell signal occurs when the BPENER rallies into overbought territory – above 80 – and then turns lower.
The red circles on the chart indicate the four sell signals that have occurred over the past two years.[ad#Google Adsense 336×280-IA]In each of the previous three cases, oil stocks sold off sharply.
The AMEX Oil Index (XOI) dropped anywhere from 11% to 29% sometime over the next five weeks.
It wasn’t always a straight shot lower, of course.
Sometimes, the oil sector chopped around for a few days before the selling pressure finally took hold.
In each case, though, shorting the oil stocks following a BPENER sell signal would have been a profitable trade.
– Jeff Clark
Source: Market Notes